Basel III B: Basel III Overview
Yale Program on Financial Stability Case Study 2014-1B-V1
11 Pages Posted: 14 Mar 2015
Date Written: November 1, 2014
In the wake of the financial crisis of 2007-2009, the Basel Committee on Banking Supervision (BCBS) faced the critical task of diagnosing what went wrong and then updating regulatory standards aimed at preventing it from occurring again. In seeking to strengthen the microprudential regulation associated with the earlier Basel Accords while also adding a macroprudential overlay, Basel III consists of proposals in three main areas intended to address 1) capital reform, 2) liquidity standards, and 3) systemic risk and interconnectedness. This case considers the causes of the 2007-2009 financial crisis and what they suggest about weaknesses in the Basel regime as it then existed. It then summarizes the provisions of Basel III to allow for an evaluation of whether it was an effective response to the causes of the financial crisis.
Keywords: Systemic Risk, Financial Crises, Financial Regulation
JEL Classification: G01, G28
Suggested Citation: Suggested Citation