Basel III

Glossary

Banking

Basel III

Introduced in 2010, Basel III brought in: Higher levels of Core Capital. The 4% core equity ratio a.k.a. Core Equity Tier 1 (CET1), under Basel I and II was raised initially to 6% and to 7% in 2019. National regulators can increase this with additional capital buffers. A Leverage Ratio looking at the actual amount of equity against the gross unadjusted balance sheet, designed to set a floor on the amount of capital. A Liquidity Coverage Ratio (LCR) to ensure banks have a minimum amount of liquidity to survive 30 days of outflows. Liquid assets are weighted to allow for differing levels of liquidity. A Net Stable Funding Ratio (NSFR) to ensure banks have a core of longer-term liabilities and are not reliant on short-term funds to fund long-term assets.

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