On 14 December 2022, the Basel Committee on Banking Supervision published a report on the evaluation of the impact and efficacy of the Basel III reforms.
This report provides the Committee’s first holistic evaluation of the impact and efficacy of the Basel III reforms and how they have affected bank resilience and systemic risk as well as assessing the possible negative side effects on banks’ lending and capital costs. The report also investigates how the different elements of the reforms have interacted, and assesses the framework’s regulatory complexity.
The report makes the following findings:
- The gains in resilience were greater for the banks that were more heavily affected by the reforms.
- Market-based measures of banking-sector systemic risk have improved following the implementation of the reforms, making the financial system less vulnerable to the distress of individual banks.
- The report finds no considerable evidence of negative effects on banks’ capital costs and lending. Instead, banks that were more heavily affected by the reforms saw a greater reduction in their cost of capital.
- There was some indication, although no robust evidence, that their lending grew less than that of their peers while overall bank lending expanded in most jurisdictions.
The report also assesses how the components of the reforms have interacted and concludes that the Basel III framework does not suffer from redundant elements. The report acknowledges that Basel III’s more sophisticated and multi-dimensional framework, which was introduced to address a wider variety of risks, results in higher regulatory complexity, but does not assess whether such complexity could be reduced while maintaining bank resilience.