3. Official announcement of Basel III

Analysis of the global financial crisis identified a number of factors attributable to the financial services sector. These included excessively high leverage applied to a broad range of transactions, both on and off the balance sheet, a decline in the level and quality of equity capital, inadequate liquidity buffers, deleverages that can amplify economic cycles, and increased interconnected relationship among financial institutions formed while engaging in complicated transactions.

In response to the industry’s deficiencies revealed by the financial crisis, the Basel III Accord was created. In December 2009, the Basel Committee on Banking Supervision released an initial draft which was followed by the publication of the Basel III text in December 2010. An agreement on the Basel III text was reached on details of new regulations. The text provides international standards for improving the quality and quantity of equity capital, increasing risk sensitivity, and introducing leverage ratio and liquidity regulations.