The fact that the definition of what constituted Tier 1 capital was neither  BIS central bankers’ speeches  1  transparent nor harmonized across countries, contributed to a generalised loss of confidence in the quality of regulatory capital. In addition, it proved necessary to increase the overall level and loss-absorbing capacity of the capital held by banks.
Moreover, Basel III introduces also entirely new concepts, such as non-risk-based leverage ratios and mandatory liquidity requirements. The leverage ratio will offer a transparent measure to the market that will complement the risk-based capital calculations and introduce additional safeguards against model risk and measurement error.