In theory, Basel III compliance should have been completed by now. The deadline was set at March 31 2019, and banks were given a six-year lead time. Under the rules of Basel III, a bank's capital adequacy ratio should be at least 8%, with the common stock ratio at 4.5% and Tier 1 capital at 6% to demonstrate capital adequacy. For Asia’s developed countries, this has not proved to be too difficult an exercise, and has created a strong buffer.
In strong economies, reaching the point of compliance has been positive. Heakyu Chang, senior director, financial institutions, at Fitch, says: “Basel III is making banks better prepared for unexpected losses. If all banks are better prepared for a stress time, the banking system would remain more solid. And hopefully, investors’ confidence would remain and banks would not face a funding problem.”
