Basel III is the third edition of international banking regulations developed by the Basel Committee after the 2008 global financial crisis. Its goal is to make the banking sector stronger and more resilient.
Basel III has three main pillars:
Capital Adequacy Requirements: Banks must maintain sufficient capital. The minimum Common Equity Tier 1 (CET1) capital is 4.5%, and total capital must be at least 8% of risk-weighted assets.
Supervisory Review Process: This evaluates banks' internal risk management practices and assesses whether their capital is adequate for their risk profile.
Market Discipline: Banks must disclose more information about their financial condition, risk exposure, and capital, increasing market transparency.
Basel III also introduced new standards like the leverage ratio and liquidity requirements (LCR and NSFR).
In Bangladesh, Bangladesh Bank has been gradually implementing Basel III regulations across the banking sector.