The NBS Head Office Building was built from 1888 – 1890, on the basis of blueprints designed by Konstantin Jovanovic (Vienna 1849 – Zurich 1923), son to distinguished artist Anastas Jovanovic...
Events and circumstances in the 1970’s and 1980’s (increased volatility on financial markets, deregulation, globalization, innovative instruments, debt crises) which resulted in the erosion of the capital base of large banks around the world, motivated the BCBS to create and publish in 1988 the first international agreement on capital requirements for the banks (Basel Capital Accord), known as Basel I. The purpose of Basel I standards was to introduce a uniform way of calculating capital adequacy in order to strengthen financial stability. Basel I defines elements of bank capital, weighting factors for calculating credit risk for balance sheet items (weighted average risk factors: 0%, 20%, 50% and 100%) and credit conversion factors for off-balance items (after which appropriate risk weighting factors are applied), as well as ratio between the capital and total exposure of the bank (balance and off-balance) risk weighted in order to calculate the capital adequacy indicators. The capital adequacy indicator of a bank, calculated in this way, should be at least 8%:
In spite of advantages and positive effects, weaknesses of Basel I standards eventually became evident:
Some of the weaknesses of Basel I, especially those related to market risk, were overbridged by the amendment to recommendations from 1993 and 1996, by means of introducing capital requirements for market risk and a new instrument for the assessment of bank’s market risk – VaR (Value at Risk).
