Basel III: Finalising post-crisis reforms

Main article: Basel III

Basel III: Finalising post-crisis reforms, sometimes called the Basel III Endgame in the United States,^[1][2] Basel 3.1 in the United Kingdom,^[3] or Capital Requirements Regulations III (CRR III) in the European Union,^[4] are additional changes to international standards for bank capital requirements that were agreed by the Basel Committee on Banking Supervision (BCBS) on 7 December 2017 as part of Basel III, first published in 2010. They have also been referred to as Basel IV; however, the secretary general of Basel Committee said in a 2016 speech he did not view the changes as substantial enough to describe them in such a way.

The timeline for required implementation was extended several times, and varies by country. In the U.S., as of August 2025, bank regulators were still working on the final requirements.^[5] The Bank of England plans to implement key parts of Basel III: Finalising post-crisis reforms in 2028.^[6] The European Union plans to implement the reforms in 2027.^[7] Canada has delayed the reforms indefinitely due to uncertainty caused by tariffs in the second Trump administration.^[8]

Critics of the reforms, in particular those from the banking industry, argue that the standards lead to a significant increase in capital requirements, when the stated intention of the Basel Committee was for the changes to the standards to be capital neutral in terms of their aggregate impact, although not necessarily neutral for individual banks.^[9]

History

Basel III is an international regulatory framework of rules on capital and liquidity requirements for banks, developed by the Basel Committee on Banking Supervision (BCBS) in response to the 2008 financial crisis. Basel III: Finalising post-crisis reforms, adopted on 7 December 2017, complement the initial Basel III.^[10][11] As the BCBS does not have the power to issue legally binding regulation, the Basel standards have to be implemented by national authorities.^[12]

The secretary general of the Basel Committee said, in a 2016 speech, that he did not believe the changes are substantial enough to warrant a new Roman numeral.^[13] The Basel Committee refer to only three Basel Accords.^[14][13]

Requirements

The reforms revise the standardised approach for credit risk (SA-CR), the internal ratings-based approach for credit risk (IRB), the credit valuation adjustment (CVA) framework, the calculation of operational risk RWAs, the leverage ratio, and introduce an aggregate output floor for risk weighted assets (RWAs).

The BCBS press release summarised the reforms as follows:^[15]

• a revised standardised approach for credit risk, which will improve the robustness and risk sensitivity of the existing approach;
• revisions to the internal ratings-based approach for credit risk, where the use of the most advanced internally modelled approaches for low-default portfolios will be limited;
• revisions to the credit valuation adjustment (CVA) framework, including the removal of the internally modelled approach and the introduction of a revised standardised approach;
• a revised standardised approach for operational risk, which will replace the existing standardised approaches and the advanced measurement approaches;
• revisions to the measurement of the leverage ratio and a leverage ratio buffer for global systemically important banks (G-SIBs), which will take the form of a Tier 1 capital buffer set at 50% of a G-SIB's risk-weighted capital buffer; and
• an aggregate output floor, which will ensure that banks' risk-weighted assets (RWAs) generated by internal models are no lower than 72.5% of RWAs as calculated by the Basel III framework's standardised approaches. Banks will also be required to disclose their RWAs based on these standardised approaches.

Capital impact

The standards are expected to increase capital requirements for British banks alone by £50 billion.^[16]

The average common equity Tier 1 capital (CET1) ratio for major European banks is estimated to fall by 0.9%, with the biggest impact on banks in Sweden and Denmark of 2.5–3%.

The December 2020 assessment by the European Banking Authority (EBA) of the capital impact of implementing Basel 3.1 in the EU is an increase of 18.5% in minimum required capital with the impact for some national banking sectors forecast to be much higher (based on figures as of 31 December 2019).^[17]

Implementation

The timeline for required implementation was extended several times, and varies by country. In the U.S., as of August 2025, bank regulators were still working on the final requirements.^[5] The Bank of England plans to implement key parts of Basel III: Finalising post-crisis reforms in 2028.^[6] The European Union plans to implement the reforms in 2027.^[7] Canada has delayed the reforms indefinitely due to uncertainty caused by tariffs in the second Trump administration.^[8]