Basel III:

i) Basel III is an internationally agreed set of measures developed by the Basel Committee
on Banking Supervision in response to the financial crisis of 2007-09. The measures aim
to strengthen the regulation, supervision and risk management of banks. Like all Basel
Committee standards, Basel III standards are minimum requirements which apply to
internationally active banks. (https://www.bis.org/bcbs/basel3.htm)
ii) Basel III is an update to two previous versions of multinational minimum standards
aimed at strengthening the banking system and establishing a regulatory baseline for
financial institutions, regardless of location. The earlier versions were called Basel I and
Basel II. In all cases, these standards have no force of law; it’s up to member nations to
implement them. (https://www.bloomberg.com/professional/blog/basel-iii-whats-
next/)

Leverage Ratio:

i) Leverage refers to the amount of debt that a firm has relative to its equity. Leverage is
often expressed in terms of a ratio, such as debt to equity or debt to assets. This is
called leverage ratio. (http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?
article=3467&context=facpubs)
ii) The leverage ratio measures the percentage of the bank’s operations (ie, its assets, or
lending) that is funded by equity instead of debt. It is therefore best thought of as a
limitation on bank borrowing. It is a crucial measure because it represents the
percentage decline in the value of a bank’s assets that would render the bank insolvent.
(https://www.economist.com/blogs/blighty/2014/10/leverage-ratio)

LCR (Liquidity Coverage Ratio):

i) the amount of cash and liquid assets the world’s main bank supervisors want banks to
hold as a buffer to ensure obligations can be met if there is another freeze in funding
markets. (https://www.economist.com/news/finance-and-economics/21569405-global-
regulators-soften-their-stance-liquidity-go-flow)

ii) The LCR promotes short-term resilience of banks to potential liquidity disruptions by
ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an
acute stress scenario lasting for 30 days.
( (https://rbidocs.rbi.org.in/rdocs/content/pdfs/CA09062014_A.pdf)

NSFR(Net Stable Funding Ratio):

i) The NSFR promotes resilience over longer-term time horizons by requiring banks to
fund their activities with more stable sources of funding on an ongoing basis.
(https://rbidocs.rbi.org.in/rdocs/content/pdfs/CA09062014_A.pdf)

ii) The purpose of the net stable funding ratio (“NSFR”) is to ensure that banks hold a
minimum amount of stable funding based on the liquidity characteristics of their assets
and activities over a one year horizon. The objective is to reduce maturity mismatches
 between the asset and liability items on the balance sheet and thereby reduce funding
and rollover risk. (https://corpgov.law.harvard.edu/2014/12/28/basel-iii-framework-
the-net-stable-funding-ratio/)

TLAC (Total Loss Absorbing Instruments)

i) Instead of a debt/equity dichotomy, equity and subordinated debt subject to write off
and/or conversion are put together as loss absorbing instruments. This approach is most
evident in the resolution proposals of the Financial Stability Board(FSB). The FSB
focusses on what it calls Total Loss Absorbing Capacity (TLAC) which it envisages a
combination of shareholders’ equity and bail-in debt.
(https://www.law.ox.ac.uk/research-subject-groups/commercial-law-
centre/blog/2015/10/fall-and-rise-debt-bank-capital)

ii) The TLAC standard defines a minimum requirement for the instruments and liabilities
that should be readily available for bail-in within resolution at G-SIBs (Globally
Systematically Important Banks) but does not limit authorities’ powers under the
applicable resolution law to expose other liabilities to loss through bail-in or the
application of other resolution tools(http://www.fsb.org/wp-
content/uploads/20151106-TLAC-Press-Release.pdf)