Basel III is simpler and stronger
The Basel Committee’s capital reforms, known as Basel III, substantially raise capital requirements from pre-crisis levels to reduce the probability of bank failures and the associated risks to taxpayers and to financial stability.
Recently, much has been made of the perceived shortcomings of Basel III. Some argue that Basel III, which comes into effect next year, is not enough. Others argue that Basel III is too complex and should be replaced by a simple leverage ratio, calculated as tangible equity to non-risk weighted assets.
In my view, the Basel III agreement fundamentally enhances national and global financial stability by both raising the level of capital required by banks, and by simplifying the regulatory framework.
The following article is an op-ed by Mr Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision, published in the Wall Street Journal, 15 October 2012.
The Basel III framework document can be downloaded from the BIS website at this link: http://www.bis.org/publ/bcbs189.pdf