The G20 pledged to do everything necessary to address the weaknesses exposed by the crisis. The proper implementation of the Basel rules will go a long way to preventing certain threats to financial stability from forming in the first place. It will also reduce the potential consequences of those threats by making the financial system much more resilient.
Nonetheless, Basel III can’t prevent the formation of all financial imbalances, such as those in housing markets. Elevated house prices can become a concern for central bankers, particularly if they are associated with higher levels of household indebtedness and leverage.