Financial institutions must meet the Basel III minimum standards for capital levels, liquidity and stable funding. The Basel III standards are overseen by the Bank of International settlements.
- The minimum required capital for a bank is based on the risk of the bank’s assets. Assets are risk weighted, the riskier a bank’s assets are, the higher its required capital.
- Banks should hold enough liquid assets to meet demands under a 30-day liquidity stress scenario.
- Banks must have stable funding relative to a bank’s liquidity needs over a one-year time horizon. Stable funding is determined by the timeline of bank’s deposits; longer-term deposits are more stable than shorter-term deposits. Stability also depends on the type of deposit (e.g., consumer deposits are more stable than interbank market funds).