End Game
The global banking system has new rules.
This new set of banking rules called "Basel III Endgame" promotes physical gold to the highest status and mandates banking transparency.
Governing bodies require banks to hold a percentage of their banking assets physically in the form of Tier 1 Assets. Tier 1 denotes the highest status of assets a bank can own. Previously, this classification excluded gold but included physical cash, digital bank reserves, U.S. Treasuries, and other "high-quality" government bonds.
Besides adjusting the list of Tier 1 Assets, under Basel III Endgame, banks must publish more reports detailing their assets, activities, and risk profile, adding transparency.
Who makes the rules?
The Basel Committee on Banking Supervision (BCBS) is a panel of Central Banks who convene in the Bank for International Settlements (BIS) in Basel, Switzerland.
The following members compose the BCBS--
Argentina, Australia, Belgium, Brazil, Canada, China, European Union, France, Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Türkiye, United Kingdom, United States.
There are also non-member "observers" -- Chile, Malaysia, United Arab Emirates
Why are the rules changing?
Not considering political forces and other power dynamics as motivating factors, banks seek stability. Allowing banks to diversify their core assets and forcing transparency adds stability to the global financial system.
Why do these changes matter?
Basel III Endgame creates an exit door to the fiat currency system. Previously, only U.S. treasuries, other "high quality" government bonds, physical cash, and digital bank reserves counted towards asset requirements. These are all government-issued currency instruments (fiat-denominated). Now, banks can meet core asset requirements with physical gold. This will be the first time in the modern era that global banking authorities permit large banks to hold commodity-backed money as Tier 1 capital.
How: The Basel Committee monitors global adoption of these rules but does not enforce them directly. Delays or deviations are corrected through political and lobbying pressures.
When: July 1, 2025 -- nations start implementation
Where: Worldwide. Nations' central banks are generally subject to these rules.
References
https://www.investopedia.com/terms/b/basell-iii.asp
https://www.bis.org/bcbs/membership.htm
https://www.reuters.com/business/finance/what-is-basel-iii-endgame-why-are-banks-worked-up-about-it-2023-07-24/
https://www.pwc.com/us/en/industries/financial-services/library/our-take/basel-iii-endgame.html
P.S.
Specifics
Increased Minimum Capital Ratios:
- Common Equity Tier 1 (CET1): Rises from 4.5% to 7.0% (including a 2.5% capital conservation buffer).
- Total Tier 1 Capital: Minimum requirement increased to 6% (up from 4.5% under Basel II).
- Leverage Ratio: A non-risk-based minimum of 3% for large banks, restricting excessive borrowing.
New Capital Buffers:
- Countercyclical Buffer: Up to 2.5% of risk-weighted assets (RWAs) during economic booms.
- G-SIB Surcharge: Additional requirements for globally systemic banks (e.g., 1–4.5% of RWAs).
Standardized Risk-Weighted Asset (RWA) Calculations:
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Banks must use stricter, regulator-prescribed models for credit, market, and operational risks, reducing reliance on internal models.
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Estimated to increase capital requirements by 16–21% for the largest U.S. banks
Increased Public reporting
FR Y-9C (Consolidated Financial Statements for Holding Companies)
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What it covers: Detailed quarterly financial data for bank holding companies, including capital ratios, balance sheet items, income, and risk exposures.
FFIEC 031/041/051 (Call Reports)
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What they cover: Quarterly reports of condition and income for individual banks, including detailed asset, liability, capital, and off-balance sheet information.
FR Y-15 (Systemic Risk Report)
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What it covers: Data on systemic risk indicators for large institutions, such as size, interconnectedness, complexity, and cross-jurisdictional activity.
How Banks Could Be Deceptive Before Stricter Rules
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Hiding Risks and Losses
Banks underreported risky assets (e.g., mortgage-backed securities) or used off-balance-sheet entities to mask exposure, as seen in the 2008 crisis. -
Manipulating Credit Reports
TD Bank knowingly reported fraudulent accounts and delayed fixing errors, misleading consumers and credit agencies -
Inflating Asset Values
Banks overstated the value of illiquid assets (e.g., real estate) to appear solvent, exploiting lax auditing standards. -
Ignoring Dispute Resolutions
Banks failed to investigate consumer disputes. This leaves errors uncorrected, harming creditworthiness. -
Exploiting Regulatory Gaps
Before Basel III, banks used internal risk models to understate capital needs, gaming risk-weighted asset calculations.
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