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E-learning interactive graphic: Basel III

International regulatory framework for banks (Basel III).

What is Basel III?

Around the world, central bankers, regulators and governments have responded to the financial crisis with new regulation and legislation. The cornerstone of this global initiative to contain risk is Basel III – sweeping new regulatory standards for banks on capital adequacy and liquidity.

Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:

  • improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source
  • improve risk management and governance
  • strengthen banks’ transparency and disclosures.

The reforms target:

    • bank-level, or microprudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress.
    • macroprudential, system wide risks that can build up across the banking sector as well as the procyclical amplification of these risks over time.

These two approaches to supervision are complementary as greater resilience at the individual bank level reduces the risk of system wide shocks.

Basel III is part of the Committee’s continuous effort to enhance the banking regulatory framework. It builds on the International Convergence of Capital Measurement and Capital Standards document (Basel II).

The interactive graphic summarises the Basel III framework and provides an overview of the various measures taken by the Basel Committee.

Revised 2011.12.20

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