Global Finance: Global Regulators Finalize Basel III Rules

The Basel Committee on Banking Supervision has finalized Basel III rules on voluntary global bank capital standards. “The original rules raised questions about the ability of global banks to use internal models to assess various risks and the need to level the playing field in global banking,” explains Efraim Chalamish for Global Finance. The rules aim to decrease bank leverage and increase liquidity, capital efficiency and stress testing as well as standardize liquidity risk. The Basel committee noted that too many stakeholders lost trust in the risk-weighted capital ratios reported by banks – after banks failed to assess the risk of subprime mortgages that triggered the 2007-2008 financial crisis. The rules try to address the concerns. Banks using their own models on risk must also consider set formulas. “Big banks will be required to publish their risk-weighted assets, and the largest banks will be required to provide additional capital on top of the Tier 1 capital of 3% of total leveraged assets,” Chalamish reports. He concludes that the rules were developed with consensus among central bankers of most major economies. – YaleGlobal