Basel III Framework: US/EU Comparison

The Harvard Law School Forum on Corporate Governance and Financial Regulation 2013-09-27


Editor's Note: Bradley Sabel is partner and co-head of the Financial Institutions Advisory & Financial Regulatory practice group at Shearman & Sterling LLP. The following post is based on a Shearman & Sterling client publication by Donald N. Lamson and Barnabas W.B. Reynolds; the full text, including summary and comparison tables, is available here.

The US and EU rules implementing Basel III follow many aspects of Basel III closely, but there are major differences in approach in several key areas. Financial institutions have been engaged in a “race to the top” to show strong capital ratios but rules on leverage appear to be the most challenging and may require significant business restructuring. The interplay between the US and EU implementation of Basel III and the gradual “phase in” of certain rules, particularly on liquidity and leverage, will have a profound impact on the relative competitiveness of relevant US and EU financial institutions. This client publication, and the accompanying US/EU comparison and summary table, highlight points of international consistency and divergence.

Basel III establishes a new set of global standards for capital adequacy and liquidity for banking organizations. Although principally aimed at banks, these standards also apply to certain other types of financial institution (e.g., EU investment firms) as well. The Basel Committee on Banking Supervision (the “Basel Committee”) developed Basel III to supplement and, in certain respects, replace, the existing Basel II standards, the composite version of which was issued in 2006 as an update to Basel I. [1] The core elements of Basel III were finalized at the international level in 2010 and implementing rules have now been issued in 25 of the 27 jurisdictions that comprise the Basel Committee. [2]

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europe eu practitioner publications banking & financial institutions financial regulation banks international corporate governance & regulation comparative corporate governance & regulation basel committee bradley sabel financial institutions shearman & sterling systemic risk international governance liquidity barnabas reynolds capital requirements risk donald lamson leverage


Bradley K. Sabel, Shearman & Sterling LLP,

Date tagged:

09/27/2013, 19:41

Date published:

09/27/2013, 09:03