Basel I (1988) focused on credit risk, Basel II (2004) included operational and market risks, and Basel III (post-2008 crisis) aimed to strengthen bank capital requirements and improve risk management.¹⁾

Basel I (1988) focused on credit risk, Basel II (2004) included operational and market risks, and Basel III (post-2008 crisis) aimed to strengthen bank capital requirements and improve risk management.²⁾

Basel I (1988) focused on credit risk, Basel II (2004) included operational and market risks, and Basel III (post-2008 crisis) aimed to strengthen bank capital requirements and improve risk management.³⁾

The Basel III proposals signify a global regulatory shift for banks, focusing on increased capital requirements and refined risk weight calculations.⁴⁾

In the US, this implementation is called the ‘Basel endgame,’ while the UK refers to it as Basel 3.1 and the EU calls it Finalised Basel III.⁵⁾

The Basel Committee on Banking Supervision established Basel regulations in response to financial turmoil in the late 1970s.⁶⁾

The 2008 financial crisis revealed significant shortcomings in Basel II, leading to Basel III, which introduced more stringent capital requirements, new risk weight calculations, and a revised leverage ratio framework.⁷⁾

Implementation has been pushed back to 1 January 2025 for the EU, and 1 July 2025 for the UK and US. Canada and Australia have already adopted Basel III.⁸⁾

The Basel endgame focuses on increasing capital against credit, market, and operational risks, significantly impacting lending costs and availability.⁹⁾

While the Standardised approach does not allow modelling, Advanced Internal Ratings-Based (A-IRB) banks previously modelled probabilities and loss given defaults (LGDs).¹⁰⁾

Basel III removes this flexibility by setting input floors (LGDs at 40% for corporates and 45% for financial institutions) and an output floor (capital requirements cannot be less than 72.5% of the Standardised equivalent).¹¹⁾

As the year draws to a close, many bankers are preparing – in some cases anxiously – for the start date of Basel 4 in the EU on January 1, 2025 (known as Basel 3.1 in the UK).¹²⁾