What does Basel III final mean for Switzerland?

The Basel agreements follow one another, and each member country has to incorporate their requirements into its own banking and financial regulations. Basel III final is a term now frequently used in the Swiss financial sector. Here’s everything we recommend you know about this terminology.

What is the Basel Committee?

The BCBS stands for Basel Committee on Banking Supervision. This international body, based in Basel, Switzerland, exists since 1974. Its aim is to strengthen banking supervision and the soundness of all financial systems in the face of the ups and downs of the global economy.

The Basel Committee therefore strives to maintain effective prudential supervision and ensure the stability of the financial world. It is managed by 28 countries, including Switzerland, through banking supervisors and central bank governors.

Definition of Basel III, an international regulatory framework

The Basel Committee issues rules known as standards. Member countries incorporate these standards into their national legislation and impose them onto financial institutions. Each time there is a European or global financial crisis, banking regulations are tightened in order to contain the risk. Following the 2008 crisis, the Basel Committee set up a new set of rules called Basel III. It follows on from Basel II. This latest standard began to be deployed in December 2010. It will be updated in June 2011.

Definition of Basel III final

However, these 2010 measures are only the first part of the Basel III reform. The Basel Committee continued to issue new standards in 2017. The lattest relates to the risk-based strengthening of bank capital. To distinguish the initial set of rules dates from 2010, the expression Basel III final is being used by regulators.

Why are we sometimes referred to as Basel IV?

During the work carried out by the Basel Committee to arrive at these latest provisions, several terminologies were used. In 2017, the BCBS made a choise between Basel IV and Basel III final. The officially term is therefore Basel III final and not Basel IV.

What is the Basel consolidated format?

In 2019, the Basel Committee brought together all the standards applicable worldwide in terms of banking regulation and supervision. It has published a document explaining the purpose of this project, called Basel Consolidated. Its aim is to consolidate, clarify and simplify existing standards without creating new ones.

What are the main measures of Basel III and Basel III Final?

Here are a few examples of the new standards defined by the Basel Committee:

  • a higher level of equity capital, with a minimum solvency ratio raised to 10.5% compared with 8% under Basel II ;
  • the introduction of a maximum leverage ratio, i.e. the mandatory ratio between a bank’s assets and its equity capital ;
  • the definition of liquidity ratios, both long-term (NSFR) and short-term (LCR).

The final draft of the Basel III standards: impact on FINMA ordinances and circulars

In 2022, the Federal Council of the Swiss Financial Market Supervisory Authority, FINMA, launched a regulatory consultation on the application of Basel III in Switzerland. This project should lead to amendments to several regulatory texts with a probable implementation date of 1 January 2025.

Here are the impacts expected in Switzerland for the final Basel III:

  • revision of the Ordinance on Capital Requirements (OFR) ;
  • repeal of FINMA circulars 2013/01, 2015/03, 2017/07, 2016/01, 2008/20 and the capital adequacy section of circular 2008/21 ;
  • issue of new FINMA circulars to replace the previous ones.

Basel III final and RegTech tools

RegTech tools such as our e-Reg platform facilitate the work of regulatory management in banks and more generally in the financial services sector. We simplify regulation thanks to a wide range of functionalities. For example, when searching for a regulation, users of our online application have access to the full context, as well as to planned regulatory developments. This is the case for Basel III final.

👉To discover other definitions around RegTech, we suggest you return to our glossary table of contents.

👉If you’d like to find out more about easyReg, take a look at our RegTech solution.