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Basel III

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 1 May 2023

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Basel III

Basel III is an international regulatory framework for banks that was developed by the Basel Committee on Banking Supervision (BCBS). It is designed to strengthen the regulation, supervision and risk management of banks and other financial institutions. The framework is intended to promote financial stability by increasing the resilience of the banking sector to shocks and reducing the risk of contagion. It also seeks to ensure that banks have sufficient capital to cover their losses and to protect depositors and other creditors.

History of Basel III

Basel III was developed in response to the financial crisis of 2008-2009, which revealed weaknesses in the banking sectorโ€™s risk management and capital adequacy. The BCBS had previously developed the Basel II framework in 2004, which was designed to improve the regulation and supervision of banks. However, the Basel II framework was found to be inadequate in the face of the financial crisis, and so the BCBS developed the Basel III framework to address the shortcomings of Basel II.

Basel III was first published in 2010 and was gradually implemented over the following years. The framework was revised in 2014 and 2017, and is currently in its final form. The framework is implemented by national regulators in each country, and is subject to periodic review by the BCBS.

Table of Comparisons

Basel II Basel III
Minimum capital requirement of 8% Minimum capital requirement of 10.5%
No liquidity requirements Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR)
No leverage ratio Leverage ratio of 3%

Summary

Basel III is an international regulatory framework for banks that was developed by the Basel Committee on Banking Supervision (BCBS). It is designed to strengthen the regulation, supervision and risk management of banks and other financial institutions. The framework is intended to promote financial stability by increasing the resilience of the banking sector to shocks and reducing the risk of contagion. It also seeks to ensure that banks have sufficient capital to cover their losses and to protect depositors and other creditors. Basel III is implemented by national regulators in each country, and is subject to periodic review by the BCBS. For more information about Basel III, please visit the BCBS website or consult your local financial regulator.

See Also

  • Basel II
  • Capital Adequacy Ratio (CAR)
  • Liquidity Coverage Ratio (LCR)
  • Net Stable Funding Ratio (NSFR)
  • Leverage Ratio
  • Financial Stability Board (FSB)
  • International Monetary Fund (IMF)
  • Financial Action Task Force (FATF)
  • Financial Conduct Authority (FCA)
  • Securities and Exchange Commission (SEC)

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