These changes, commonly known as the Basel III Accords, will require banks to maintain more capital in reserve, hold higher-quality capital, and assign greater risk weights to certain types of assets.2
Why were these changes considered necessary? And how might the new standards help prevent future crises? To understand the rationale behind the changes, it is helpful to examine the history of bank capital regulation and explore some reasons why previous regulatory frameworks may have proved inadequate during the crisis.
This article appeared in the Third Quarter 2013 edition of Business Review.