Basel III

As Basel III is implemented across the globe, several timing and consistency issues will arise in different jurisdictions.

It is imperative that more robust peer reviews by G-20 countries take place with industry involvement to ensure consistent implementation. While there has been a consensus reached among global regulators on capital requirements, we have yet to reach the same for liquidity coverage ratios (LCRs) and net stable funding ratios (NSFRs).

Adoption Timeline

 *Implementation begins 1 January 2013 

Capital and Liquidity Ratios

Through Basel III, the Basel Committee on Banking Supervision (BCBS) is introducing a countercyclical capital buffer within the range of zero to 2.5 percent of risk-weighted assets. Banks must meet the buffer with Common Equity Tier 1 – possible use of other fully loss absorbing capital is still under review.

Notably, the final text does not define a surcharge for systemically important financial institutions (SIFIs), but says that SIFIs “should have loss-absorbing capacity beyond the minimum standards and the work on this issue is ongoing.” The BCBS is developing a proposal on a methodology comprising both quantitative and qualitative indicators to assess the systemic importance of financial institutions at a global level.
 

Resources

• Bank for International Settlements (BIS): International regulatory framework for banks (Basel III) 

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