Towards this end, the Basel III has set its objectives to improve the shock absorbing capacity of each and every individual bank as the first order of defence and in the worst case scenario, if it is inevitable that one or a few banks have to fail, Basel III has measures to ensure that the banking system as a whole does not crumble and its spill-over impact on the real economy is minimized.
Therefore, Basel III will have some micro-prudential elements so that risk is contained in each individual institution; and a macro-prudential overlay that will “lean against the wind” to take care of issues relating to the systemic risk.