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Basel III (Bank for International Settlements — Basel Committee)
Basel III (Bank for International Settlements — Basel Committee)
International banking regulatory framework (BIS Basel Committee). Sets minimum capital requirements, liquidity coverage ratio (LCR), net stable funding ratio (NSFR), leverage ratio, and counterparty credit risk requirements. National implementation via local regulators (Federal Reserve, ECB, PRA, BOJ, etc.).
Who must comply: All internationally active banks. Systemically important financial institutions (G-SIBs) face additional surcharges.
Penalties: Capital adequacy violations trigger regulatory intervention at increasing severity — restrictions on dividends, mandatory capital raising, management replacement, resolution.
Why it matters: Basel's risk-weight calculation is rule-heavy and verification-friendly. The gate stack can encode credit risk weight mappings and produce auditable proof that capital calculations follow the correct methodology. First-mover advantage: Basel compliance is done via spreadsheets and specialized risk platforms. No platform uses formal verification for risk-weight mapping correctness. A $100K/yr Basel gate package for a G-SIB is a trivial expense relative to the capital requirement penalty of getting the mapping wrong.
Part of the compliance framework index.