Basel Committee Standards

Basel Committee on Banking Supervision

The Basel Committee on Banking Supervision (BCBS) sets global standards for the prudential regulation of banks and provides a forum for banking supervisory cooperation.

Basel Framework Evolution

Basel I (1988)

• First capital accord
• 8% minimum capital ratio
• Credit risk focus
• Risk-weighted assets

Basel II (2004)

• Three pillars approach
• Credit, market, operational risk
• Internal ratings approach
• Supervisory review
• Market discipline

Basel III (2010-2019)

• Response to financial crisis
• Enhanced capital quality
• Liquidity requirements
• Leverage ratio
• Countercyclical buffers

Basel III Final Reforms (2023+)

• Output floor
• Revised standardised approaches
• Operational risk revision
• CVA framework updates

Basel III Capital Requirements

Capital Ratios

| Requirement | Minimum | |------------|---------| | CET1 | 4.5% | | Tier 1 | 6.0% | | Total Capital | 8.0% | | Capital Conservation Buffer | 2.5% | | Countercyclical Buffer | 0-2.5% | | G-SIB Buffer | 1-3.5% |

Capital Quality

• Common Equity Tier 1 (CET1)

  • Common shares
  • Retained earnings
  • Regulatory adjustments

• Additional Tier 1 (AT1)

  • Perpetual instruments
  • Loss absorbency

• Tier 2

  • Subordinated debt
  • General provisions

Liquidity Standards

Liquidity Coverage Ratio (LCR)

• HQLA / Net cash outflows ≥ 100%
• 30-day stress scenario
• High-quality liquid assets

Net Stable Funding Ratio (NSFR)

• Available stable funding / Required stable funding ≥ 100%
• One-year horizon
• Funding stability

Leverage Ratio

• Tier 1 capital / Exposure measure ≥ 3%
• Non-risk-based backstop
• Off-balance sheet items

Standardised Approaches

Credit Risk SA

• Risk weights by exposure class
• Corporate, retail, sovereign
• Real estate exposures

Operational Risk

• Business indicator approach
• Internal loss multiplier
• Historical loss data