Basel III: international regulatory framework for banks
Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. The measures aim to strengthen the regulation, supervision and risk management of banks. Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.
The Basel III reforms have now been integrated into the consolidated Basel Framework, which comprises all of the current and forthcoming standards of the Basel Committee on Banking Supervision. For background, set out below are the main publications that describe the changes to the Basel Framework that were agreed as part of Basel III.
Finalisation of the Basel III post-crisis regulatory reforms
Summarised Basel III
Additional material on the finalisation of the Basel III reforms
The post-crisis regulatory reforms were endorsed by the Group of Central Bank Governors and Heads of Supervision (GHOS), the Basel Committee's oversight body, on 7 December 2017. The adjustments to the market risk framework were endorsed by the GHOS on 14 January 2019. The revised standards will make banks more resilient and restore confidence in banking systems.
Implementation of the Basel standards: Regulatory Consistency Assessment Programme (RCAP)
Full, timely and consistent adoption and implementation of Basel standards is critical to:
- improve the resilience of the global banking system
- promote confidence in prudential ratios
- encourage a predictable and transparent regulatory environment for internationally active banks
The Basel Committee and its governing body, the Group of Central Bank Governors and Heads of Supervision, have therefore set as a high priority the full and effective implementation of Basel standards within the globally agreed time frame. The Committee closely monitors and assesses these dimensions – timeliness and consistency – on a regular basis.
The Basel Committee established a comprehensive Regulatory Consistency Assessment Programme (RCAP) in 2012 to monitor and assess the adoption and implementation of its standards, while encouraging a predictable and transparent regulatory environment for internationally active banks.
Role and remit
Through the RCAP the Committee seeks to ensure full, timely and consistent implementation of the Basel III framework, and thus to contribute to global financial stability.
The RCAP monitors adoption of Basel III standards by member jurisdictions (timeliness), assesses implementation across member jurisdictions (consistency) and assesses implementation across banks (outcomes).
The RCAP also supports the Financial Stability Board's (FSB) monitoring of the implementation of the agreed G20 financial reforms.
Workstreams and methods
The RCAP consists of two distinct but complementary workstreams:
Monitoring
Monitoring focuses on the status of adoption of all Basel III standards in member jurisdictions to ensure that these standards are transposed into national law or regulation according to the internationally agreed time frames. This is based on information provided by each member jurisdiction.
Assessment
The Committee evaluates the consistency and completeness of the adopted standards, including the significance of any deviations from the Basel III regulatory framework. These consistency assessments are carried out on a jurisdictional and thematic basis:
Jurisdictional assessments (regulatory implementation consistency) review the extent to which domestic regulations are aligned with the minimum Basel requirements agreed by the Committee and help identify material gaps in such regulations. To date, the focus has been on risk-based capital standards, the Liquidity Coverage Ratio (LCR), the systemically important bank (SIB) framework, the net stable funding ratio (NSFR) and large exposures framework. Assessments of the leverage ratio framework (LEV) and the Basel III revisions to the risk weighted assets (RWA) started in 2025.
Thematic assessments (consistency of bank outcomes) examine the implementation of the Basel requirements at the individual bank level and seek to ensure that prudential ratios are calculated consistently by banks across jurisdictions to improve comparability across outcomes.
RCAP Handbook
The Handbook for jurisdictional assessments (the Handbook) contains the guidance and principles for RCAP assessors, assessed jurisdictions and experts seeking background information on RCAP issues and implementation topics.
The Handbook is a flexible compendium: guidance and principles are revised or elaborated further as the RCAP evolves. It is updated to integrate lessons learnt from jurisdictional assessments or, when the RCAP focusses on a new set of standards. It is also a reference for jurisdictions intending to carry out their own implementation reviews. As such, it could also be used for training and preparation purposes.
The Handbook presents a general framework as well as specific methodologies for assessing the consistency and completeness of jurisdictional regulations with Basel standards. The framework is sufficiently general to accommodate differences in structural and institutional factors across jurisdictions.
Evaluation of implemented Basel III standards
After implementation, the Committee's focus is on evaluation. This encompasses the assessment of the effectiveness of the implemented Basel standards in achieving the intended goals as well as the identification of any unintended consequences. Objective, agnostic and empirically based evaluation is an integral part of the Committee's policy development process.
The Committee established its evaluation programme in mid-2020 with the goal of assessing if the already implemented Basel III reforms have achieved their overarching objective of increasing the banking sector's resilience. The evaluation work involves the review of broad range of evidence and undertaking extensive new empirical research. It also benefits from the views and input of a broad range of stakeholders. In 2021-22, the Committee published three evaluation reports ranging in scope. The Committee will continue evaluating the impact and efficacy of Basel III in the medium term according to its 2025-26 work programme.
The Basel Committee is also involved in other activities related to implementation and evaluation of its standards, including quantitative impact studies and work related to global systemically important banks (G-SIBs) as well as analyses of the effects of the G20 financial regulatory reforms.
Other activities related to implementation and evaluation
The Basel Committee is also involved in other activities related to implementation and evaluation of its standards, including quantitative impact studies and work related to global systemically important banks (G-SIBs) as well as analyses of the effects of the G20 financial regulatory reforms.
The Committee regularly updates the G20, through the Financial Stability Board (FSB), on member jurisdictions' progress towards implementing the Basel III standards. It is also involved in cross-sectoral thematic evaluations conducted by the FSB:
Assessing the effects of G20 financial regulatory reforms: The Committee participates in evaluations of the analysis of the effects of G20 reforms conducted by the FSB in collaboration with the standard setting bodies (SSBs). This has included evaluations related to the effects of reforms on: