Basel III B: Basel III Overview

Yale Program on Financial Stability Case Study 2014-1B-V1

11 Pages Posted: 14 Mar 2015

See all articles by Christian McNamara

Christian McNamara

Yale University - Yale Program on Financial Stability

Michael Wedow

European Central Bank (ECB) - Directorate Financial Stability and Supervision

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: November 1, 2014

Abstract

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

McNamara, Christian and Wedow, Michael and Metrick, Andrew, Basel III B: Basel III Overview (November 1, 2014). Yale Program on Financial Stability Case Study 2014-1B-V1. Available at SSRN: https://ssrn.com/abstract=2576939 or http://dx.doi.org/10.2139/ssrn.2576939

Christian McNamara

Yale University - Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Michael Wedow

European Central Bank (ECB) - Directorate Financial Stability and Supervision ( email )

Frankfurt a.M.
Germany

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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