In response to the financial crisis of 2008 the Basel committee for bank supervision which is composed of several central bank governors from the top G7 countries, indicated the overhaul of Basel II banking rules to Basel III. Some of new standards include redefining the criteria for Tier 1 capital in addition increasing the bank’s minimum common equity requirements from 2% to 4.5%. As well as creating a new non-risk based leverage ratio that will serve as a backstop to the risk-based measure surrounding common equity and a counter-cyclical capital buffers. While the Basel III requirements will be implemented in phases with the final phase occurring in 2015. If you would like to learn more about Basel III please use the following links:
http://www.economist.com/blogs/freeexchange/2010/09/basel_iii
