Basel III is the third of the Basel Accords which were put in place by the Basel Committee on Banking Supervision in 2004 in an effort to mitigate banking and economic risk. Effective in 2009, in the wake of the 2008 financial crisis, Basel III is composed of three pillars:

  • Pillar 1: sets minimum capital requirements and outlines capital adequacy
  • Pillar 2: establishes supervisory review requirements of capital adequacy assessments
  • Pillar 3: imposes greater market discipline and stringent disclosure of capital structure. Adequacy and risk weighted assets are required by the regulatory authorities
The main goal of Basel III is to improve transparency in banks, how they deal with economic stress and strengthen individual banks in order to avoid widespread crashes. Basel III in particular works to ensure that all banks are held accountable, even those deemed “too big to fail.”
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