Basel standards refer to the minimum global standards for regulating and supervising banks to enhance financial stability. In 1988, Basel I – the Basel Capital Accord – was introduced to set the minimum capital requirements for banks as 8% of risk-weighted assets. In 2004, Basel I was replaced with Basel II consisting of three pillars: (1) revised minimum capital requirements, (2) supervisory review of an institution’s capital adequacy and internal assessment process, and (3) disclosure.
Following the global financial crisis in 2007–2009, a series of amendments and introduction of standards took place to strengthen the regulation, supervision and risk management of banks. The Basel III reform covered a number of micro- and macro-prudential standards including but not limited to those on the credit risk, securitisation, liquidity risk, market risk, counterparty credit risk, credit risk valuation risk, liquidity risk, introduction of various capital buffers including counter-cyclical capital buffer and buffer to address the externalities created by systemically important banks, and back-stop measures that are not based on risk measures such as large exposures framework, leverage ratio requirement and the output floor. The Basel III reform was complete with the finalisation of the revised market risk framework (or fundamental review of the trading book; FRTB) in 2019.