The benefits of balance sheet management

2. Balance sheet management

Banks' original motives for redistributing credit risk were driven by a number of factors, chiefly the 1998 Basel Accord on Capital Adequacy (Basel I), which became effective in 1993. That accord, which aimed to strengthen the global banking system by capping the level of risky loans, dictated that banks maintain a minimum ratio of capital to risk-weighted credit exposures of 8%.

The effectiveness of the original Basel guidelines has been a subject of animated debate for well over a decade, with

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