Capital adequacy

Regulations

The main international effort to establish rules around capital requirements has been the Basel Accords, published by the Basel Committee on Banking Supervision housed at the Bank for International Settlements. This sets a framework on how banks and depository institutions must calculate their capital. After obtaining the capital ratios, the bank capital adequacy can be assessed and regulated. In 1988, the Committee decided to introduce a capital measurement system commonly referred to as Basel I. In June 2004 this framework was replaced by a significantly more complex capital adequacy framework commonly known as Basel II. Following the 2008 financial crisis, Basel II was to be replaced by Basel III, however this was completed only in some countries and is scheduled to be completed in others in 2025 and 2026. Implementation of the Basel III: Finalising post-crisis reforms (also known as Basel 3.1 or Basel III Endgame), introduced in 2017, was extended several times, and is now scheduled to go into effect on July 1, 2025 with a three-year phase-in period.