Which Banks Are Basel 3 Compliant? How to Find Out

Basel III is an international regulatory framework developed by the Basel Committee on Banking Supervision (BCBS) in response to the 2007-2009 global financial crisis. Its primary objective is to strengthen the regulation, supervision, and risk management of banks worldwide.

The framework aims to enhance financial stability by making banks more resilient to economic shocks and reducing the risk of widespread financial distress. It builds upon previous Basel Accords, Basel I and Basel II, introducing more stringent requirements for banks globally.

Core Principles of Basel 3

Basel III introduces fundamental components focusing on capital adequacy, leverage, and liquidity. These principles ensure banks can absorb losses, restrict excessive risk-taking, and maintain sufficient liquid assets.

A primary focus of Basel III is strengthening capital requirements, which dictate the amount and quality of capital banks must hold to absorb potential losses. Common Equity Tier 1 (CET1) capital is considered the highest quality capital, comprising common stock and retained earnings. Under Basel III, banks are required to maintain a minimum CET1 ratio of 4.5% of their risk-weighted assets (RWA).

Tier 1 capital includes CET1 and additional Tier 1 capital. The minimum Tier 1 capital ratio under Basel III is 6% of RWA. Total capital, including Tier 1 and Tier 2 (gone-concern capital), has a minimum requirement of 8% of RWA. Beyond these minimums, Basel III also mandates a capital conservation buffer of 2.5% of RWA, bringing the total Common Equity Tier 1 capital requirement to 7% and the total capital adequacy ratio to 10.5%. This buffer builds capital reserves during favorable economic periods, which banks can draw upon during stress without facing restrictions on payouts.

Basel III also introduced a non-risk-based leverage ratio as a backstop to risk-based capital requirements. This ratio is calculated by dividing Tier 1 capital by a bank’s average total consolidated assets, with a minimum requirement of 3%. The leverage ratio aims to restrict the build-up of excessive on- and off-balance sheet leverage in the banking system, which contributed to the 2008 financial crisis. In the United States, the Federal Reserve established a higher supplemental leverage ratio, requiring a minimum of 5% for large banks and 6% for systemically important financial institutions (SIFIs).

Liquidity standards ensure banks have sufficient high-quality liquid assets (HQLA) to withstand short-term stress and stable long-term funding. The Liquidity Coverage Ratio (LCR) requires banks to hold enough HQLA to cover net cash outflows over a 30-day stressed scenario. The Net Stable Funding Ratio (NSFR) requires banks to maintain a stable funding profile in relation to their assets and off-balance sheet activities over a one-year horizon. Both LCR and NSFR are set at a minimum of 100%.

Banks Subject to Basel 3 Requirements

Basel III is an internationally agreed-upon framework, but its implementation and scope vary across jurisdictions and types of banks. Standards are minimum requirements, primarily for internationally active banks. National regulators adopt and enforce these rules.

The framework primarily targets Global Systemically Important Banks (G-SIBs) and Domestic Systemically Important Banks (D-SIBs), often referred to as “too big to fail” institutions. G-SIBs are identified by the Financial Stability Board (FSB) and face stricter capital and liquidity requirements, including additional capital surcharges. In the United States, examples of G-SIBs include major financial institutions like JPMorgan Chase and Wells Fargo.

Domestic Systemically Important Banks (D-SIBs) are those that, while not globally systemic, could significantly impact their domestic financial system and economy if they experienced distress. National authorities identify D-SIBs and may impose additional capital or other requirements beyond the general Basel III framework. This ensures domestically focused institutions with systemic importance are adequately regulated.

National regulators, such as the Federal Reserve in the United States, implement the Basel III framework through their own regulations, which can lead to variations from international standards. The Federal Reserve finalized rules to implement Basel III capital requirements in the U.S. in 2013. Recent discussions, sometimes called the “Basel III Endgame,” propose revising capital requirements for large U.S. banks (over $100 billion in assets) to improve consistency and risk alignment.

Smaller, less complex banks may not be subject to the full, stringent requirements of Basel III. Instead, they might operate under simplified or tailored versions of the framework, or entirely different domestic regulations. For example, U.S. banking regulators have provided guidance and tailored approaches for community banking organizations, recognizing that the full scope of Basel III may not be appropriate for all institutions.

Finding a Bank’s Compliance Status

Determining a bank’s Basel III compliance requires examining publicly available financial disclosures and regulatory reports. No single global list of “compliant” banks exists, so consult primary sources where banks and regulators publish data.

Publicly traded banks, particularly larger ones, routinely publish comprehensive financial disclosures that include information pertinent to their Basel III compliance. Key documents include annual reports, such as the Form 10-K filed with the Securities and Exchange Commission (SEC) in the United States, and quarterly reports (Form 10-Q). Within these reports, look for sections titled “Regulatory Capital,” “Capital Management,” or “Risk Management.”

A particularly important source is a bank’s Pillar 3 disclosures. Basel III is structured around three pillars: Pillar 1 (minimum capital), Pillar 2 (supervisory review), and Pillar 3 (public disclosure). Pillar 3 disclosures provide detailed qualitative and quantitative information on a bank’s capital, risk exposures, risk assessment processes, and capital adequacy calculations, reported against Basel III requirements. These reports specifically outline a bank’s Common Equity Tier 1 (CET1), Tier 1, and Total Capital ratios, as well as their Leverage Ratio, Liquidity Coverage Ratio (LCR), and Net Stable Funding Ratio (NSFR). For instance, a bank’s Pillar 3 report will show its CET1 ratio compared to the 4.5% minimum plus any applicable buffers, or its LCR against the 100% threshold.

Regulatory agencies also publish reports and data that can offer insights into the banking sector’s overall compliance. While these reports typically do not name individual banks as “compliant” or “non-compliant,” they often discuss aggregate compliance levels and trends within the regulated institutions. For example, the Federal Reserve Board publishes various reports related to bank supervision, capital, and liquidity. These publications provide context on the general health and regulatory adherence of the banking system.

Financial news outlets and analysis from credit rating agencies also frequently report on the compliance status of major banks. These can be useful secondary sources for a quick overview or for identifying major developments. However, for precise and detailed information, it is always best to refer directly to the bank’s own official financial disclosures.