BCBS-BASEL-III

BCBS Basel III bank capital framework 2010+.

Definition

Basel III pillars: (1) Pillar 1 Minimum Capital Requirements (CET1 Common Equity Tier 1 min 4.5% RWA Risk-Weighted Assets + Capital Conservation Buffer CCB 2.5% + Countercyclical Capital Buffer CCyB 0-2.5% + SRB Systemic Risk Buffer + G-SIB Buffer 1-3.5%, total CET1 min 7-13% depending on bank), Tier 1 6%, Total Capital 8%. (2) Pillar 2 Supervisory Review Process SREP. (3) Pillar 3 Market Discipline (disclosures). Basel III innovations: LCR Liquidity Coverage Ratio (HQLA / 30-day stressed cash outflows >100%), NSFR Net Stable Funding Ratio (Available Stable Funding / Required Stable Funding >100%), Leverage Ratio min 3% (Tier 1 / Total Exposures non-risk-weighted), CVA Credit Valuation Adjustment risk capital, SACCR Standardised Approach Counterparty Credit Risk. Basel IV (finalization Basel III 2017): Output Floor 72.5% Internal Ratings IRB vs Standardised Approach, FRTB Fundamental Review Trading Book, Operational Risk SMA Standardised Measurement Approach. Implementation timeline: 2013-2022 Basel III initial, 2023-2028 Basel III finalization (Basel IV) phased.

Origin

BCBS Basel Committee founded 1974 by G10 governors after Herstatt crisis ; Basel I 1988 (capital 8%), Basel II 2004 (risk-sensitive), Basel III 2010-2017 (post 2008 crisis), phased implementation 2013-2028 ; Basel IV finalization 2017 published.

Example in context

JPMorgan Chase G-SIB tier 4 (3.5% G-SIB buffer), maintains CET1 >12% (vs 7% baseline + 3.5% G-SIB buffer = 10.5% minimum + Stress Capital Buffer SCB Fed CCAR ~2-3%), LCR ~115%, NSFR ~110% Basel III + IV finalization compliance.

Related terms

• BIS CBDC — other BIS workstream.