Basel III Norms: Banking Regulation - Importance in Times of Bank Failure: HQLA, NSF, Tier 1 | GS
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Basel III Norms
Iterative step in the ongoing effort to enhance the banking regulatory framework.
Consortium of central banks from 28 countries devised Basel III in 2009 in response to the financial crisis of 2007–2008 and ensuing economic recession
Basel III Goals
improve regulation, supervision, and risk management
Tier 1 capital is more liquid and considered more secure than Tier 2 capital. A bank’s total capital is calculated by adding both tiers together. Under Basel III, the minimum total capital ratio that a bank must maintain is 8% of its risk-weighted assets (RWAs), with a minimum Tier 1 capital ratio of 6%.
Have Capital Buffer
New leverage and liquidity requirements
high-quality liquid assets (HQLA)
net stable funding (NSF)
