## From Basel I to Basel III: Sequencing Implementation in Developing Economies

_IMF Working Papers, June 14, 2019_

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## Bibliographic details
- Authors: Caio Ferreira, Nigel Jenkinson, Christopher Wilson
- Published: June 14, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498315227.001

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### Summary
- Developing economies can strengthen their financial systems by implementing the main elements of global regulatory reform.
- Effective prudential frameworks may require adapting international standards to account for:
  - the sophistication and size of financial institutions,
  - the relevance of different financial operations in their market,
  - the granularity of information available,
  - the capacity of supervisors.
- Under a proportionate application of the Basel standards, smaller institutions with less complex business models would be subject to a simpler regulatory framework that enhances resilience without generating disproportionate compliance costs.
- The paper provides guidance on how non-Basel Committee member countries could incorporate banks’ capital and liquidity standards into their framework.
- The analysis builds on the authors’ experience providing technical assistance on—and assessing compliance with—international standards in banking supervision.

### Findings and guidance
- Adaptation factors to consider when implementing Basel standards:
  - institution sophistication and size,
  - market relevance of financial operations,
  - information granularity,
  - supervisory capacity.
- Proportionate application:
  - smaller, less complex institutions → simpler regulatory framework,
  - objective → enhance financial-sector resilience while avoiding disproportionate compliance costs.
- Specific focus areas:
  - incorporation of banks’ capital standards,
  - incorporation of liquidity standards,
  - sequencing of implementation appropriate for non-Basel Committee member countries.

### Policy recommendations
- Tailor international Basel standards to local market and institutional characteristics rather than adopting a one-size-fits-all approach.
- Apply a proportionate regulatory framework so regulatory complexity scales with institution complexity and systemic relevance.
- Prioritize capacity-building in supervisors and information systems to support effective implementation of capital and liquidity standards.
- Sequence implementation to allow non-Basel Committee member countries to incorporate core capital and liquidity requirements progressively, leveraging technical assistance and compliance assessments.

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2019/06/14/from-basel-i-to-basel-iii-sequencing-implementation-in-developing-economies-46895_