The Level 3 assessments seek to ensure that the outcomes of the Basel rules are consistent in practice across banks and jurisdictions. It extends the findings of Level 1 and Level 2, both of which focus on national rules and regulations, to supervisory implementation at the bank level.
The Committee's initial focus is on banks' calculation of risk-weighted assets (RWAs, or the denominator of the Basel capital adequacy ratio). Differences in the application of the standard can lead to unintended variations in the capital ratios. The work distinguishes between variations in RWAs that are risk-based (ie due to differences in underlying risk at the exposure/portfolio level) and practice-based (eg due to model selection or calibration of model parameters, exercise of judgement, application of national discretion). The Committee has established two expert groups: one group is reviewing the calculation of RWAs for the banking book and the other for the trading book. These groups will assess whether there are material inconsistencies in the way banks calculate RWAs.
The following Level 3 reports have been published: