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Explanation:
The Basel Accords were indeed introduced to provide incentives for banks to enhance their risk measurement and management systems. The global financial crisis of 2007-2009 exposed several weaknesses in the banking system, including inadequate risk management practices. The Basel Accords were designed to address these issues by encouraging banks to improve their risk management systems. This was achieved by setting minimum capital requirements and introducing new regulatory standards for bank capital adequacy, stress testing, and market liquidity risk. By doing so, the Basel Accords aimed to strengthen the resilience of the banking sector and contribute to a higher level of safety and soundness in the banking system.
Choice B is incorrect because the primary objective of the Basel Accords was not to incentivize investors to increase their investments in the banking sector. While a stable and robust banking sector may indirectly attract more investments, the main focus of the Basel Accords was on improving the risk management practices of banks and enhancing the overall safety and soundness of the banking system. The Accords did not specifically aim to increase investments in.
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Q.1553 After the global financial crisis of 2007-2009, the financial regulators decided to implement some rules and regulations for the stability of the financial markets and the banking sector. For this purpose, the Basel Accords were introduced to deal with the deficiencies of the banking system. In essence, the purpose of the Basel Accords was:
A
to offer motivations to the banking sector to improve their risk measurement and management systems.
B
to offer motivations to investors to increase their investments in the banking sector.
C
to contribute to a higher level of trading in the banking system.
D
to invite risk managers and regulators to take part in the wellbeing of the financial sector.