Which type of risk was not explicitly addressed by Basel I?  A. Credit risk  B. Market risk  C. Operational risk  D. Settlement risk

Break Down the Problem

1. Identify the types of risks that were explicitly addressed by Basel I.
2. Determine which risk among the given options was not included in the framework.

Relevant Concepts

• Basel I, introduced in 1988, primarily focused on capital adequacy and risk management in the banking sector, especially regarding credit risk.
• It outlined requirements for banks to maintain sufficient capital against credit risks but did not comprehensively address other types of risks.

Analysis and Details

1. Credit Risk: Basel I explicitly addressed this risk by setting minimum capital requirements against credit exposure.
2. Market Risk: Although initially not part of the Basel I framework, market risk was later addressed in Basel II; Basel I did include some aspects indirectly through the capital requirements related to market fluctuations.
3. Operational Risk: This type of risk was not specifically covered in the Basel I framework and was later included in Basel II as a distinct category.
4. Settlement Risk: This was also not explicitly addressed in the original Basel I agreement and is generally considered was included indirectly under operational issues.

Verify and Summarize

Upon reviewing the risks outlined in Basel I, it can be concluded that both operational risk and settlement risk were not explicitly addressed. However, operational risk is typically highlighted as a prominent omission in discussions about Basel I.

Final Answer

C. Operational risk