Basel III

Basel III is a comprehensive set of reform measures developed by the Basel Committee on Banking Supervision to strengthen bank regulation, supervision, and risk management following the 2008 financial crisis. Key requirements include minimum capital ratios (4.5% CET1, 6% Tier 1, 8% total), capital conservation buffer (2.5%), countercyclical buffer (0-2.5%), and surcharges for systemically important banks (1-3.5%). New liquidity standards include the Liquidity Coverage Ratio (100% of 30-day stressed outflows) and Net Stable Funding Ratio (stable funding for illiquid assets). For example, a global systemically important bank might need total capital of 13% (8% minimum + 2.5% conservation buffer + 2.5% G-SIB surcharge). Basel III also introduced leverage ratio (3% minimum), enhanced risk coverage for derivatives and repos, and stricter definitions of capital. Implementation began in 2013 with full phase-in by 2019, though COVID-19 delayed some elements. Critics argue requirements reduce lending capacity while supporters credit Basel III with creating a more resilient banking system.