Basel III: International Banking Regulations

Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

An international regulatory framework for banks setting stricter capital, leverage, and liquidity standards, developed by the Basel Committee on Banking Supervision after the 2008 crisis.
Is Basel III legally binding?
How does Basel III differ from Basel II?
What is 'Basel IV'?

Updated June 22, 2026

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In June 2023, the US federal banking agencies proposed rules implementing the Basel III "endgame" standards, which would tighten capital requirements for large American banks such as JPMorgan Chase and Bank of America.

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Basel III is the third iteration of the Basel Accords, a set of voluntary global banking standards issued by the Basel Committee on Banking Supervision (BCBS), which is hosted at the Bank for International Settlements (BIS) in Basel, Switzerland. The framework was agreed in the wake of the 2007–2008 global financial crisis, which exposed weaknesses in bank capital quality, excessive leverage, and inadequate liquidity buffers under the earlier Basel II regime.

The initial Basel III text was published by the BCBS in December 2010 and endorsed by G20 leaders at the Seoul Summit that same year. Key elements include:

Higher and better-quality capital: a minimum Common Equity Tier 1 (CET1) ratio of 4.5% of risk-weighted assets, plus a 2.5% capital conservation buffer.
Countercyclical capital buffer: a discretionary add-on of up to 2.5% that national regulators can impose during credit booms.
Leverage ratio: a non-risk-based backstop, set at a minimum of 3% of Tier 1 capital to total exposures.
Liquidity standards: the Liquidity Coverage Ratio (LCR), requiring banks to hold high-quality liquid assets to survive a 30-day stress, and the Net Stable Funding Ratio (NSFR), addressing longer-term funding.
Surcharges for global systemically important banks (G-SIBs).

A further package, often called "Basel III finalisation" or informally "Basel IV," was agreed in December 2017 and revises the calculation of risk-weighted assets, including an output floor limiting the benefit banks can gain from internal models.

Basel III is not a treaty; standards take legal force only when implemented domestically — for example through EU Capital Requirements Regulation/Directive packages, and US federal banking agency rules. Implementation timelines have been extended several times, partly due to the COVID-19 pandemic.

Frequently asked questions

Is Basel III legally binding?

No. The Basel Accords are non-binding standards issued by the BCBS; they become enforceable only when national or regional authorities transpose them into law, such as EU regulations or US federal rules.

How does Basel III differ from Basel II?

Basel III keeps the risk-weighted capital approach of Basel II but raises minimum capital levels, demands higher-quality capital (CET1), and adds new tools: a leverage ratio, liquidity ratios (LCR and NSFR), and capital buffers.

What is 'Basel IV'?

It is an informal label for the December 2017 BCBS package finalising Basel III, which revises risk-weighted asset calculations and introduces an output floor. The BCBS itself considers it part of Basel III.