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

Phase  Introduced  Implementation 
Basel II June 2004 31 December 2006
Basel 2.5 July 2009 31 December 2011
Basel III December 2010 1 January 2019*

 *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.
 

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