What are Basel III requirements?

In simple terms, Basel III tells banks how much loss-absorbing capital and how much liquidity they must hold. The Bank for International Settlements describes it as "an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09". Basel III norms are "minimum requirements which apply to internationally active banks" (BIS, Basel III). They are standards; the Basel III rules become binding only when a jurisdiction writes them into its own law, as the EU did in the CRR.

The Basel III capital requirements set three minimum ratios of capital to risk-weighted assets. "Common Equity Tier 1 must be at least 4.5% of risk-weighted assets (RWA). Tier 1 capital must be at least 6% of RWA. Total capital must be at least 8.0% of RWA" (RBC20.1). On top comes a capital conservation buffer of 2.5% of Common Equity Tier 1 (RBC30.2), and banks may also face a countercyclical buffer and higher requirements for systemically important banks.

Risk-weighted assets cover credit risk, market risk and operational risk. Banks can use the standardized approach or, with approval, internal models. The CRR III recitals describe the standardized approaches as using "fixed parameters, which are based on relatively conservative assumptions". The output floor links the two: risk-weighted assets may not fall below 72.5% of the figure under the standardized approaches (RBC20.4).

The Basel III leverage ratio is Tier 1 capital divided by total exposure, without risk weights, and it must be at least 3% (LEV20.3 to LEV20.7). In the EU, Article 92(1)(d) CRR sets the same 3% from June 28, 2021.

The two liquidity rules are the liquidity coverage ratio, which covers 30 days of stress, and the net stable funding ratio, which covers one year. Both have a minimum of 100%. Both are covered in detail under liquidity risk.

Basel III raised the quality and the level of capital and added leverage and liquidity rules that Basel II did not have. Basel II was published on June 10, 2004 (BCBS, June 2004). The first phase of Basel III, from December 2010 and revised in June 2011, put "a greater focus on going-concern loss-absorbing capital in the form of Common Equity Tier 1", added capital buffers and a minimum leverage ratio, and introduced the LCR and the NSFR (BCBS, June 2011).

No official Basel IV exists. The name stands for the reforms the Basel Committee finished in 2017. The BIS calls that package "Basel III: Finalising post-crisis reforms", endorsed on December 7, 2017, with market risk changes endorsed on January 14, 2019 (BIS). CRR III calls it the "finalised Basel III framework" (recital 2), and FINMA speaks of the "final Basel III standards". None of the three uses "Basel IV". Basel 3 and 4 are therefore the old and the new part of one framework. FINMA sums up the new part: internal models were restricted, and the standardized approaches became more risk-oriented.

Yes. In the EU, CRR III applies from January 1, 2025 (Article 3 of Regulation (EU) 2024/1623). Basel III implementation in the EU phases in the output floor: banks may use 50% in 2025, rising each year to 70% in 2029 (Article 465 CRR). For crypto-assets, the Basel standard SCO60 has been in effect since January 1, 2026. Until the EU adopts its own version, Article 501d CRR sets a transitional treatment, with a 1,250% risk weight for crypto-assets that are neither tokenized traditional assets nor MiCA-compliant asset-referenced tokens.

In Germany and Austria, Basel III applies through the CRR, which is directly applicable EU law. The ECB supervises significant banks; in Germany, the Bundesbank and BaFin share supervision of the others, and in Austria the FMA with the OeNB (OeNB).

Germany has two seats on the Basel Committee: the responsible member of the Bundesbank's Executive Board and the Director of Banking Supervision at BaFin (Bundesbank). The Bundesbank has its head office in Frankfurt am Main (Bundesbank).

Switzerland is outside the EU. The Federal Council adopted the final Basel III standards mainly in the revised Capital Adequacy Ordinance, and FINMA issued five new ordinances with the technical rules. All entered into force on January 1, 2025 (FINMA, March 27, 2024). This page gives no legal advice.