Basel III

AAA

DEFINITION of 'Basel III'

A comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain capital requirements.

INVESTOPEDIA EXPLAINS'Basel III'

Basel III is part of the continuous effort made by the Basel Committee on Banking Supervision to enhance the banking regulatory framework. It builds on the Basel I and Basel II documents, and seeks to improve the banking sector's ability to deal with financial and economic stress, improve risk management and strengthen the banks' transparency. A focus of Basel III is to foster greater resilience at the individual bank level in order to reduce the risk of system wide shocks.

VIDEO

Loading the player...
RELATED TERMS
  1. Bank For International Settlements ...

    An international organization fostering the cooperation of central ...
  2. Basel I

    A set of international banking regulations put forth by the Basel ...
  3. Tier 1 Capital

    A term used to describe the capital adequacy of a bank. Tier ...
  4. Tier 2 Capital

    One of two categories by which a bank's capital is divided. Tier ...
  5. Tier 3 Capital

    Tertiary capital held by banks to meet part of their market risks, ...
  6. Basel II

    A set of banking regulations put forth by the Basel Committee ...
Related Articles
  1. Investing

    What is Basel III?

    The purpose of the Basel accords is to improve the worldwide bank regulatory framework.
  2. Trading Strategies

    Introduction To Swing Trading

    This style, between day trading and trend trading, may be a good one for beginners to try.
  3. Personal Finance

    Using Economic Capital To Determine Risk

    Discover how banks and financial institutions use economic capital to enhance risk management.
  4. Personal Finance

    Understanding The Basel III International Regulations

    The Basel III regulations mark a drastic reform in international banking. But how do they impact the future's investment landscape?
  5. Insurance

    Basel II Accord To Guard Against Financial Shocks

    Problems with the original accord became evident during the subprime crisis in 2007.
  6. Personal Finance

    How Basel 1 Affected Banks

    This 1988 agreement sought to decrease the potential for bankruptcy among major international banks.
  7. Mutual Funds & ETFs

    Top ETFs for Investing in Coffee

    Learn about the market for coffee, one of the largest agricultural markets, and two ETFs that investors can use to obtain exposure to the coffee market.
  8. Stock Analysis

    The Top Performing Airlines Right Now

    Learn about the airline industry and its top-performing companies. Understand these top-emerging airlines and why they have taken more market share.
  9. Investing

    Go Green with a Investment in Green Bonds

    If you want to invest in a socially responsible way, green bonds may be for you. And as the market grows retail investment opportunities will grow too.
  10. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in Australia

    Learn about some of the best performing exchange-traded funds that investors use to obtain exposure to stock investments in Australia.
RELATED FAQS
  1. What average annual growth rate is typical for the banking sector?

    The banking sector plays an important intermediary role by channeling available funds for productive uses in the economy ... Read Full Answer >>
  2. What is the minimum capital adequacy ratio that must be attained under Basel III?

    Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8%. The capital adequacy ratio measures a ... Read Full Answer >>
  3. What is the minimum liquidity coverage ratio that a bank must have from 2016 to 2 ...

    The minimum liquidity coverage ratio that banks must have under the new Basel III standards are phased in beginning at 7 ... Read Full Answer >>
  4. How are risk weighted assets used to calculate the solvency ratio in regulatory capital ...

    Risk-weighted assets are the denominator in the calculation to determine the solvency ratio under the provisions of the Basel ... Read Full Answer >>
  5. What are the Basel III rules, and how does it impact my bank investments?

    The Basel III rules are a regulatory framework designed to strengthen financial institutions by placing guidelines pertaining ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!