“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
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.
The Basel Committee’s oversight body – the Group of Central Bank
Governors and Heads of Supervision (GHOS) – agreed on the broad
framework of Basel III in September 2009 and the Committee set out
concrete proposals in December 2009. These consultative documents
formed the basis of the Committee’s response to the financial
crisis and are part of the global initiatives to strengthen the
financial regulatory system that have been endorsed by the G20
Leaders. The GHOS subsequently agreed on key design elements of the
reform package at its July 2010 meeting and on the calibration and
transition to implement the measures at its September 2010
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).