Explain one important event that caused the most recent change in Basel norms, in 2010.

Correct Answer:

One major event that led to the 2010 change in Basel norms was the global financial crisis of 2007–2008. During that crisis, many banks around the world had taken on too much risk, held too little high-quality capital, and relied too heavily on borrowed money and short-term funding. When housing prices fell and mortgage-backed securities lost value, banks suffered huge losses and some either failed or needed government bailouts. This showed that the earlier Basel rules were not strong enough. In response, Basel III was introduced in 2010 to require banks to hold more and better capital, limit leverage, and improve liquidity so they could better survive future financial shocks.