Given the inherent risky nature of banking activity, bank capital represents a fundamental buffer to cover

unexpected losses and to prevent failures which could have highly detrimental impacts on the real economy.

In order to protect savings and to maintain public confidence in the functioning of the overall financial

system, banks worldwide are subject to intense regulation and supervision.

In this context, the main aim of the Basel Committee on Banking Supervision (BCBS), established in 1974, is

to enhance global financial stability by strengthening the prudential regulation and supervision of banks. The

Committee has over time published a series of international standards, mostly related to bank capital

regulation, widely known as Basel accords.

In the light of recent global developments (e.g. Covid-19 pandemic crisis), and by providing pertinent

examples, your task is to:

1. Critically discuss the role and importance of bank capital and the rationale for holding and maintaining

adequate capital levels.