Basel III post-crisis reforms

In December 2017, the Basel Committee on Banking Supervision approved some reforms to the Basel III framework to respond to the deficiencies identified by the global financial crisis and "lay the regulatory foundations for a resilient banking system that supports the real economy".

According to the Committee, the main objective of these reforms is "to restore the credibility of the calculation of risk-weighted assets (RWA) and to improve the comparability of bank capital ratios".

Therefore, taking into account that risk-weighted assets are "an estimate of risk that determines the minimum level of regulatory capital that a bank must maintain in order to face unexpected losses", the Basel III reforms consisted of:

1. Improve the robustness and risk sensitivity of standard methods for credit risk, credit valuation adjustment risk (CVA) and operational risk.
2. Restrict the use of internal model-based methods, by introducing limits on some of the parameters used to calculate capital requirements in the internal ratings-based method (IRB) for credit risk, and by eliminating the use of credit risk-based methods. internal models for CVA risk and operational risk.
3. Introducing a leverage ratio cushion to further limit leverage in Global Systemically Important Banks (G-SIBs).
4. Replace the current Basel II output floor with a more robust risk-sensitive floor based on the revised Basel III standard methods.

The maximum date for implementation of these new provisions by banking entities with international activity is January 1, 2022.