The Basel III requirements for better quality of capital, improved risk weightings, higher minimum capital ratios, and a capital conservation buffer comprise a key component of the post-crisis reform agenda. But they are just that – a component. Although a few features of Basel III reflect macroprudential concerns, in the main it was a microprudential exercise.
The new minimum equity capital ratio and conservation buffer were calibrated on the basis of an historical examination of the individual loss experiences of banks in the United States and six other countries. A macroprudential perspective on capital requirements complements the microprudential orientation of Basel III.