Pillar 1, 2, 3 (Basel III)

Basel III introduces three pillars to strengthen banking safety and stability. Pillar 1 sets minimum capital requirements, ensuring banks hold enough financial buffer to cover risks like loans defaulting. Pillar 2 involves supervisory review, where regulators evaluate a bank’s risk management and encourage better practices beyond the basic rules. Pillar 3 emphasizes market discipline by requiring banks to disclose their risk exposures and financial health, allowing investors and customers to make informed decisions. Together, these pillars aim to make banks more resilient, transparent, and better prepared for economic shocks.