The federal banking agencies in the United States said last week that they support efforts to reform Basel III international bank capital standards.
The reforms were finalized last week by the Basel Committee on Banking Supervision.
The Basel III agreement was introduced in 2010 for international banks in response to the global financial crisis of 2007-2008. Basel III is a regulatory framework on bank capital adequacy, stress testing, and market liquidity risk.
Basel III introduced leverage and liquidity requirements to protect against excessive borrowing in an effort to make sure banks have enough liquidity during periods of financial stress. It intended to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage.
The Basel III reforms finalized last week are intended to improve Basel III in a few different areas. Specifically, the new reforms focus on risk sensitivity, reducing regulatory capital variability, and leveling the playing field among internationally active banks.
The U.S. federal banking agencies — Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency — will consider how to appropriately apply these revisions to the Basel III reform package in the United States.
Any changes they propose to this agreement will be made through the standard notice-and-comment rulemaking process.