The main goal of the Basel I accord was to ensure that banks maintain sufficient capital to remain solvent in times of distress. This was done to promote the stability of the financial system and prevent bank failures that could trigger a financial crisis. The accord introduced the concept of risk-weighted assets, which required banks to hold capital in proportion to the different risk levels of their assets. This was a significant step towards risk-based regulation, which is now a fundamental principle in banking supervision. The Basel I accord was the first of three Basel accords issued by the Basel Committee on Banking Supervision, which provides a forum for regular cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide.

Choice A is incorrect. The Basel I accord was not designed to develop a common currency for all the banks. It was primarily focused on ensuring that banks maintain sufficient capital to remain solvent during times of financial distress.

Choice C is incorrect. While the Basel I accord did aim to improve the solvency of banks, it did not specifically target raising the solvency level of small banks to match that of big banks. Its main objective was to ensure overall stability in the banking sector by requiring all banks, regardless of their size, to maintain adequate capital.

Choice D is incorrect. As explained above, the primary objective of Basel I accord was indeed related to banking regulation and it wasn't 'None of the above'. It aimed at maintaining sufficient capital for all types of bank so as they can remain solvent during times of financial distress.

Things to Remember

• Basel I accord was introduced in 1988 by the Basel Committee on Banking Supervision.
• It established the minimum capital requirements that banks needed to hold to cover credit risk.
• The accord classified assets into five risk categories, ranging from 0% to 100% risk weight, based on perceived credit risk.