Basel III

The term Basel III refers to a package of reforms to the Basel Committee of the Bank for International Settlements (BIS ) for the existing banking regulations of Basel II It represents the valid from 2013 onwards in response to the global financial and economic crisis from 2007 disclosed weaknesses in the previous banking regulation dar.

In December 2010, the interim final version of Basel III was released, then certain aspects were still being discussed. The implementation in the European Union was a new version of the Capital Requirements Directive (CRD ), with comprehensive transitional provisions entered into force on 1 January 2014. In Switzerland, the reaction was carried out in 2013., Where in particular the capital ratios are more stringent.

  • 2.1 The aim of the reform
  • 2.2 criticism

Content of the reforms

The reforms are working on the equity base and also with the liquidity requirements.


Increase the quality, consistency and transparency of the capital base

The financial crisis showed that the global banking system had insufficient high-quality equity. Basel III has been focused on the so-called core capital ( "Common Equity "). It consists of public companies primarily from the paid-up share capital and retained earnings.

The following measures are taken to strengthen equity:

  • Innovative hybrid capital with repayment incentives, which can account for up to 15% under Basel II, will no longer be accepted as Tier 1 capital.
  • Tier 2 capital will be harmonized, that is, national definitions are to give way to an international standard.
  • Tier 3 capital will be abolished completely.

A total of future be kept especially those equity instruments that participate in the current loss. Equity instruments that are available only on liquidation (for example, subordinated loans ) are less important. This is to bring to the fore the going concern basis ( " going-concern principle").

Improve the risk coverage

  • Increase the capital requirements for credit and market risks, as well as complex securitisations ( Pillar I)
  • Increased standards for supervisory review process (Pillar II)
  • Increased standards for disclosure ( Pillar III)
  • Revision of the rules for the trading book (not yet completed)
  • Increase the capital requirements for counterparty exposures arising from derivatives, repo and securities transactions; Reducing the procyclicality and incentives for the settlement of OTC contracts through central counterparties
  • Reducing the reliance on external ratings

Introduction of a leverage ratio ( leverage ratio )

The debt limit is a Alternativmaß for risk-weighted metrics; they do, the largely un-weighted total assets in relation to the regulatory capital. They save the banking sector from excessive debt and thus reduce the risk of destabilizing debt structure. Thus, the leverage ratio complements the capital standards under Pillar 1

The design of the leverage ratio is not yet adopted final. You should only apply from 2018 as binding minimum size. Transition, a limitation of total assets to 33.3 times the total core capital is (Total Tier 1 capital ratio: 3% of total assets) provided. From 2015, the gearing ratio of the Institute is to publish as part of the disclosure under Pillar 3.

Reduction of procyclicality and strengthening of counter-cyclical buffers

Pro-cyclical elements reinforced the financial crisis. This was due in particular the accounting standards. Due to market value under IFRS and other standards which institutions had to quickly adapt to the declining stock market prices the balance sheet value of securities and other receivables. To make matters worse, according to IAS 39 prior to entry of default, no value adjustments ( " Provisions for onerous contracts " ) were allowed to be formed, which would have shifted at least in part the resulting loss in prior periods and thus diminished its impact.

For this reason, the Basel Committee supports the efforts of the International Accounting Standards Board, the rules to revise for risk prevention. Details should regulate the new accounting standard IFRS 9.

In addition, Basel III goes to the problem of pro-cyclicality through the introduction of a capital conservation buffer and a countercyclical capital buffer. These measures have a complementary effect for risk prevention: While higher provisions for expected losses absorb, absorb the capital buffer unexpected losses.

In the capital buffers are "soft" capital requirements. If a bank can not meet the buffer requirements, it does not lose its banking license. However, it is limited in terms of profits. As long as the buffers are not met, banks are the future required to withhold part of the gain or even the full benefit in order to strengthen the capital base. In this case, only lower dividends may be paid. Also, bonuses and stock repurchase program are affected by these restrictions.

The capital conservation buffer will be 2.5 %. The countercyclical buffer is determined by the national supervisor for their country's banks and should be between 0 and 2.5%. Changes in the height will be announced 12 months in advance. This is intended to supervision get another tool to prevent economic overheating and excessive lending.

The capital requirements of the capital buffer to be met with common equity ( common equity Tier 1).

Systemic Risks and mutual relationships

( " Excessive crosslinking " quote) among systemically important banks to the spread of the crisis in procyclical effects increased during the financial crisis, the pronounced mutual business contributed. Therefore, the Basel Committee developed specific requirements for systemically important banks, together with the Financial Stability Board (FSB). The works are based on the schedule of the FSB.

Among the already adopted measures intended to reduce systemic risk and reduce the excessive crosslinking, include the following:

  • Handle capital incentives for banks, OTC derivatives through central counterparties
  • Higher capital requirements for trading and derivative transactions and securitization and off-balance sheet transactions
  • Higher capital requirements for interbank transactions


The financial crisis had shown that adequate liquidity is crucial for the functioning of markets and the banking sector. The deterioration in market liquidity situation could suddenly disappear, which brought the banking sector in refinancing needs. Central banks around the world looked then forced to intervene with liquidity measures.

In response to these weaknesses in the financial system, the Basel Committee created basic principles for liquidity management and supervision thereof. The Committee also proposes two new quantitative minimum standards with different risk horizons.

Liquidity Coverage Ratio

The Liquidity Coverage Ratio ( LCR) to ensure that global banks hold in case of a pre-defined stress scenarios sufficient short-term liquidity to offset cash outflows for a month can. These banks need to hold liquid and freely available high quality facilities which are negotiable in times of crisis. Ideally, they should be accepted by a central bank as collateral.

Net Stable Funding Ratio

The Net Stable Funding Ratio ( NSFR ) requires banks that they have a function of the maturity profile of its receivables on long-term funding sources. The net stable funding ratio is designed to prevent the banks rely too heavily on short-term funding sources.

Transition phase

The transition phase foresees a gradual implementation of reforms. It should also allow the banks to implement the reforms under Basel III by retained earnings and capital increases without jeopardizing their lending to the rest of the economy. The following table provides details about (see Annex 4 of the Basel III: A global regulatory framework for more resilient banks and banking systems).

Since delayed the political decision-making at EU level, to account for the first year of the transition period. Upon entry into force 1 January 2014 so that the funds earmarked for this year values ​​would apply.


Objective of the reform

In the heart of the reform is the goal of a balance between a more stable financial system and avoid a credit crunch, also the limitation and reduction of the liability of public authorities and taxpayers.

Economists at the Bank for International Settlements, go to a study of only small dampening effect on the economies.


As with Basel II, the planned new rules were assessed by the banks critical. In addition to the well-known fear of higher capital adequacy requirements ( capital adequacy ratios ) that stood above all the changes to the consolidation requirement of subsidiaries and the resulting consequences in the foreground. It was feared, among other things, the ten largest German banks would have to raise 105 billion euros of additional capital and reduce loans worth up to 1,000 billion euros. Was controversial at first also, what is to be recognized in addition to common shares and retained earnings as equity. In the German institutions, it covers the so-called silent participations.

Some economists was also critically discussed how the focus on liquidity and capital requirements effective help. The persons engaged in the IMF economist Zamil about Basel III looks as though an improvement, but is an elementary solid selection of assets and the valuation standards and to contrast a good risk management by banks and assertive regulators are needed.

The economist Martin Hellwig and Anat Admati criticize the Basel III regulation written clearly too low equity ratios before. The two economists maintain an equity ratio in relation to total bank assets in the amount of 20-30 percent for necessary so that the financial system is safer and healthier. They also criticize the " Basel " approach, which prescribes capital requirements in relation to risk- weighted assets. The two, according to economists, this would only run in practice it beyond that banks would hardly hold equity.

Basel III was from the beginning in terms of deprivation of lending to SMEs controversial. Although the German representative of the Basel Committee tried to reassure: " Studies indicate that the burden on the economy through the introduction of Basel will hold III expected to be limited. " And "Because of the new rules our typical medium-sized banks usually are not its mission to provide the real economy with enough credit to fail. ", but there is a risk of promotion of a credit crunch. Although the requirements were reduced with respect to equity deposit to lending to SMEs in October 2012 to the banks, but it has become harder mainly for smaller companies to get credit. In this context, the requirement of the Expert Council ( from November 2013 - during a recessionary trend in Europe) appears extremely volatile, restrict lending to small and medium-sized enterprises.


For September 12, 2010 be adopted committee meeting was convened.

At the G -20 summit of major economies in Korea Basel III was adopted in principle. On 16 December 2010, the Basel Committee published a formulated rule text.

The reaction was carried out in Europe on an adaptation of the Capital Requirements Directive (CRD ). Significant provisions are included in the Capital Requirements Regulation (CRR ). This is an EU Regulation, which is directly applicable and therefore does not need to be transposed into national law. The CRD IV and CRR entered into force 1 January 2014 and replace in many parts of the existing national provisions relating to capital adequacy requirements.