The implementation of Basel II coincided with the terrible 2007-2008 financial crisis.
The crisis strongly undermined the reputation of the Basel II Accord, by showing its many flaws in the management of risk, in particular because of the absence of a uniform definition of capital for banks, and the underestimation of liquidity risk and excessive leverage as possible causes of financial distress for major financial institutions.
Some commentators even blamed Basel II for the crisis, in particular for its pro-cyclicality, but we will come back to this in the next weeks.
In 2009, the Basel Committee started discussing on a new version of the Basel Accords:
Basel III.
The first version of Basel III appeared in 2011. The implementation is now ongoing, and it should be fully operative by 2019.
In this class we describe the most important characteristics of Basel III.

3…2…1…let’s go!