🔍 Basel III

Basel III#

International banking rules on capital and risk management.

Important

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What it is#

Basel III is the international banking regulation framework from the Basel Committee, written after the 2007–09 financial crisis to make banks more resilient. It tightens the capital, liquidity, and leverage a bank must hold against its risks.

Its core requirements#

It raises both the quantity and quality of capital (more common equity), adds liquidity rules (holding enough liquid assets to survive stress), a leverage cap, and buffers that build up in good times to absorb losses in bad ones — all aimed at reducing systemic risk.

Why it matters for ML#

Banks estimate credit risk — probability of default, loss given default — with models whose outputs feed capital calculations and stress tests. That puts those models under strict model-risk management and validation, making Basel III a major reason financial ML must be auditable and robust.

Theme: Explainability & Governance · All terminology

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Mind map — connected ideas

High-Stakes Domains · Fair Lending laws · Risk-Based Decisions · Model Stability · Fairness Guardrails · LIME (Local Interpretable Model-agnostic Explanations)

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