Basel IV Year One: Implementation Progress and Early Impact Assessment — TGB Regulatory & Policy Brief March 2026

Where implementation stands after the first full year

The reforms covered here are the final elements of Basel III, finalised between 2017 and 2019, which the Basel Committee on Banking Supervision (BCBS) Secretary General notes are sometimes referred to as the Basel III endgame in the United States, Basel 3.1, Basel 3.5 or Basel 4. Implementation of this final plank started on 1 January 2023, following a one-year delay due to the pandemic. The label "year one" therefore fits the EU, Switzerland and Hong Kong, where the main package applied from 1 January 2025, better than it fits the Committee's membership as a whole.

The Committee's annual progress update, published on 3 October 2025, set out the adoption status of its 27 member jurisdictions as of end-September 2025. Over the preceding 12 months, the final standards came into effect in more than 40% of those jurisdictions. As a result, the revised credit risk and operational risk standards and the output floor were in effect in around 80% of member jurisdictions, the credit valuation adjustment (CVA) standard in nearly 70% and the revised market risk standards in nearly 40%. The Committee's Chair told an industry audience on 15 October 2025 that more than three quarters of member jurisdictions had implemented the standards, and that 80% had implemented the credit risk and output floor standards, which form the bulk of the reforms.

The Committee's oversight body, the Group of Central Bank Governors and Heads of Supervision (GHOS), tracked the same progress. At its meeting on 12 May 2025 it said about 70% of member jurisdictions had implemented, or would shortly implement, the standards, and members unanimously reaffirmed their expectation of implementing all aspects of the framework in full, consistently and as soon as possible. When it met again on 9 March 2026 the figure was about 75%, and the remaining jurisdictions had communicated their plans to do so. GHOS said recent market developments had highlighted the importance of a prudent global framework and a regulatory level playing field.

The gap between the credit and market risk bars is the defining feature of year one. The Secretary General argued in December 2025 that the delayed market risk and CVA standards typically account for a small proportion of risk-weighted assets, around 5%. That is a fair point about capital, but it understates the competitive sensitivity of trading books, which is precisely where the main jurisdictions have chosen to wait for one another. The Committee has also kept its implementation machinery running. In November 2025 it said that full and consistent implementation of Basel III continued to be its highest priority, approved Regulatory Consistency Assessment Programme (RCAP) reports on the United Kingdom's Net Stable Funding Ratio (NSFR) and large exposures rules, and agreed a targeted review of the NSFR standard where RCAP assessments had found common deviations.

Jurisdictions: who went live and who waited

Early movers

Japan scheduled the package for 2024. Its Financial Services Agency set the implementation date at 31 March 2024 for internationally active institutions and for domestic institutions that use internal models, and 31 March 2025 for other domestic institutions. The Japanese package covers both the December 2017 framework and the January 2019 market risk framework.

Switzerland and Hong Kong followed at the start of 2025. The Swiss Federal Council confirmed on 26 June 2024 that the amendment to the Capital Adequacy Ordinance enshrining the final standard would enter into force on 1 January 2025 as planned. In Hong Kong, a commencement notice gazetted on 10 October 2024 appointed 1 January 2025 for Parts 3 and 5 of the Banking (Capital) (Amendment) Rules 2023, which cover credit risk, the output floor, operational risk and sovereign concentration risk, and market risk and CVA risk respectively.

The EU: on time, except for the trading book

In the EU, most of the Basel III requirements entered into force on 1 January 2025 under the 2024 Banking package. The exception is the Fundamental Review of the Trading Book (FRTB). The Commission first postponed its application by one year to 1 January 2026, to align with other major jurisdictions. On 12 June 2025 it adopted a second delegated act moving the date to 1 January 2027, citing further delays in Basel III implementation by some major global jurisdictions and concern about the international level playing field. That act was subject to scrutiny by the European Parliament and the Council for 3 months, extendable by a further 3 months. The EU therefore enters its second year with credit, operational risk and output floor rules in force and market risk still on the old basis.

The UK: two delays, one end date

The UK has moved twice. The Prudential Regulation Authority (PRA) used PS9/24 to push implementation back by six months to 1 January 2026. On 17 January 2025, in consultation with HM Treasury, it delayed by a further year to 1 January 2027, saying this allowed more time for greater clarity to emerge about plans for implementation in the United States. It also shortened the transitional periods so that the date of full implementation remains 1 January 2030.

The PRA published its final rules in PS1/26 on 20 January 2026, without substantive changes to the near-final policy in PS17/23, PS9/24 and PS7/25. The Basel 3.1 rules take effect on 1 January 2027, but the internal model approach (IMA) for market risk will come into effect on 1 January 2028. All seven respondents to that proposal supported the delay. In the interim period from 1 January 2027, firms retain their existing IMA permissions, while positions outside them move to the new standardised approaches. The PRA refused to let modelling firms defer the new standardised approach as well, saying this would distort competition, and noted that all firms have to calculate it for the output floor in any case.

Canada: a floor held in place

Canada has frozen the most contested element. In a consultation dated 20 February 2025, the Office of the Superintendent of Financial Institutions (OSFI) said the output floor will remain at 67.5% until further notice, and committed to notify affected banks at least two years before resuming increases. It cited the competitive challenges for Canada's internationally active banks of conforming to Basel III while other jurisdictions are slower to adopt it.

Final Basel III: where the main jurisdictions stood in March 2026

Source: Financial Services Agency (Japan), FSA Weekly Review No.517: Publication of the finalized amendments to the regulatory notice pertaining to Pillar 1 and Pillar 3 requirements of capital adequacy, 30 November 2022; European Commission (DG FISMA), Commission proposes to postpone by one additional year the market risk prudential requirements under Basel III, 12 June 2025; State Secretariat for International Finance (Switzerland), Federal Council confirms implementation of final Basel III standard with effect from 1 January 2025, 26 June 2024; Government of the Hong Kong SAR (with the Hong Kong Monetary Authority), Banking (Capital) (Amendment) Rules 2023 (Commencement) Notice 2024 gazetted, 10 October 2024; Bank of England (Prudential Regulation Authority), The PRA announces a delay to the implementation of Basel 3.1, 17 January 2025; Bank of England (Prudential Regulation Authority), PS1/26 - Implementation of Basel 3.1: Final rules, 20 January 2026; Office of the Superintendent of Financial Institutions (Canada), Consultation: Draft Capital Adequacy Requirements (CAR) Guideline, 20 February 2025; Federal Reserve Board, FDIC and OCC, Agencies request comment on proposals to modernize the regulatory capital framework and maintain the strength of the banking system, 19 March 2026.

The table shows how far the timetable has fragmented around market risk and the output floor, the two elements with the most direct bearing on internationally active banks' relative costs.

Early impact: what the monitoring data show

Capital: a shrinking estimate

The BCBS published its latest Basel III monitoring report on 24 March 2026, using data as of 30 June 2025 for 150 banks, including 101 large internationally active Group 1 banks, among them 29 global systemically important banks (G-SIBs), and 49 Group 2 banks. It is the first period in which EU banks reported under their national final Basel III standards for all risk types but market risk.

For Group 1 banks, Tier 1 minimum required capital (MRC) would increase by 1.7% at full phase-in. That comprises a 2.6% increase from risk-based requirements, offset by a 0.9 percentage point reduction in leverage ratio requirements, and market risk is the main driver of the risk-based increase at 1.7%. Compared with December 2024, the average impact fell by 1.1 percentage points for Group 1 banks and by 0.5 percentage points for G-SIBs, which the Committee attributes to implementation progress. Banks in the sample show a cumulative capital shortfall of €1.0 billion. Applying the 2022 total loss-absorbing capacity (TLAC) minimum, 14 G-SIBs reported an aggregate incremental shortfall of €3.2 billion.

The regional split is wide. The impact is 1.0% for European banks and 3.9% for the rest of the world, while for the Americas it is negative at -1.7%; the Group 1 impact analysis included 28 European, 13 American and 44 rest-of-world banks. For Group 2 banks, the overall impact is 0.8%, made up of a 3.4% increase in risk-based measures, mainly from the output floor at 3.6%, partly offset by a 2.6% reduction in leverage ratio MRC.

These figures need careful reading. The Committee states that the fully phased-in results ignore transitional arrangements, which expire on 1 January 2028, and assume no behavioural responses, so they may not be comparable with industry estimates. The negative figure for the Americas measures the global standard, not any rule US banks must meet, since the US rules were still at the proposal stage. ### The long fade in measured impact The Secretary General's December 2025 remarks put the trend in context. For a consistent sample of 29 large internationally active banks, the median estimated increase in MRC was approximately 8% in 2017 and more or less zero by end-2024. For the Americas and the Middle East, Africa and Asia-Pacific region, the CET1 ratio impact of the final reforms is in the order of 10 to 20 basis points. In Europe, where the impact is relatively higher, it is described as manageable, and fully implemented CET1 ratios are comparable across regions in a range of 13.2% to 13.7%. The Committee's Chair said that, if implemented as globally agreed, the standards are not expected to result in a significant increase in global capital requirements. ### Ratios, earnings and liquidity Current ratios have held up through the transition. The average CET1 ratio of Group 1 banks under the current framework was stable at 13.9%, and 14.1% for the balanced data set in June 2025. Group 1 CET1 capital rose from €1,203 billion at end-June 2011 to €3,029 billion at end-June 2025, an increase of 152%, and was up €90.2 billion, or 3.1%, from end-December 2024. Profits after tax reached their highest level of €182.4 billion in H1 2025, with a dividend payout ratio of 34.2%. Fully phased-in Tier 1 leverage ratios average 6.1% for Group 1 banks, 6.0% for G-SIBs and 6.9% for Group 2 banks. Group 1 leverage ratios are lower in Europe, at 5.0%, than in the Americas, at 5.7%, and the rest of the world, at 7.0%. Liquidity has also strengthened: the weighted average Liquidity Coverage Ratio (LCR) was 135.0% for Group 1 banks and 191.6% for Group 2 banks, and the NSFR was 123.8% and 134.2% respectively. All banks reported an LCR above 100%, against an €18.3 billion shortfall for three banks in December 2024. This suggests that the transition is being absorbed from retained earnings rather than from balance-sheet retrenchment.

Europe's first year under CRR3

On 23 March 2026 the European Banking Authority (EBA) published its Q4 2025 Risk Dashboard alongside a new CRR3/CRD6 dashboard, which replaces its former Basel 3 monitoring report. The new tool projects key capital metrics across the full output floor implementation period, 2025 to 2030, using the floor calibration factors of 50%, 55%, 60%, 65%, 70% and 72.5%.

The headline is benign. Risk-weighted assets of EU/EEA banks rose by just over 1% in 2025 to €10.2 trillion, while the CET1 ratio, transitional under CRR3, remained stable at 16.3%. Return on equity was 10.4%, against 10.5% in December 2024. Under fully loaded CRR3, the average CET1 ratio would ease to around 15.3%, reflecting an average 4.7% relative increase in Tier 1 MRC once the output floor is fully phased in. The number of institutions bound by the floor is projected to rise from 2 at December 2025 to 33 under full implementation. On a static balance sheet, no capital shortfalls emerge before 2030; the total shortfall is then projected at €424.8m, rising to €12.7bn once the floor is fully implemented.

The EBA flags an important limitation. Supervisory reporting does not yet fully capture credit risk transitional arrangements, so the credit risk impact is recorded as zero and is not reflected in the total MRC figure. The 4.7% figure is therefore best treated as a floor-driven estimate rather than a complete measure of the package.

The comparison with an earlier EBA monitoring exercise is still instructive. In the October 2024 EBA report, EU banks' minimum Tier 1 requirement was estimated to rise by 7.8% at full implementation in 2033, mainly because of the output floor and operational risk. That report put the increase at 8.6% for Group 1 banks, 12.2% for global systemically important institutions and 3.6% for Group 2 banks. It estimated a need for €0.9 billion of Tier 1 capital and a total capital shortfall of €5.1 billion. The two exercises differ in method, so we would not read the gap between 7.8% and 4.7% as a precise measure of adjustment. Both, however, point the same way: the remaining cost of the EU package is concentrated in the output floor, and it arrives late in the transition.

Banks enter the second year with ample liquidity and stable asset quality. The EU/EEA LCR rose to 163.1% from 160.7% in Q3 2025, the NSFR rose to 126.9%, and the non-performing loan ratio was stable at 1.8%, for a sample of around 160 banks covering more than 80% of sector assets. The EBA also disclosed €132bn of direct exposures to counterparties in the Middle East at end-2025.

The US re-proposal reverses the direction of travel

In July 2023 the US agencies proposed implementing the final Basel III components, estimating an aggregate 16% increase in CET1 requirements for affected bank holding companies, with transition from 1 July 2025 and full compliance from 1 July 2028. On 19 March 2026 the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency requested comment on three new proposals, with comments due by 18 June 2026.

The first proposal would apply mainly to the largest, most internationally active banks and would implement the final components of the Basel III agreement, while having these banks use one rather than two sets of risk-based calculations. Category I and II firms would use a single expanded risk-based approach covering credit, operational, market and CVA risk; the standardised approach would no longer apply to them and the advanced approaches would be removed. The market risk framework would apply to banks with more than $5 billion of trading activity or trading activity of 10% or more of total assets. Board staff describe the requirements as generally consistent with BCBS standards, but the market risk approach differs by more fully recognising diversification.

The second proposal would revise the standardised approach for other banks, cutting the corporate risk weight from 100% to 95% and the default risk weight for unassigned assets from 100% to 90%. Category III and IV banks, generally those with $100 billion to $700 billion of assets, would recognise most elements of accumulated other comprehensive income (AOCI) in regulatory capital, with a five-year transition. The third, from the Federal Reserve Board, would revise the surcharge for global systemically important banks, including by setting it in 10 basis point rather than 50 basis point increments.

Estimated capital effects of final Basel III, by jurisdiction and measure

Source: Basel Committee on Banking Supervision (BIS), Basel III monitoring report (data as of 30 June 2025), 24 March 2026; European Banking Authority, The European banking sector enters period of geopolitical uncertainty from a position of strength (Q4 2025 Risk Dashboard and CRR3/CRD6 dashboard), 23 March 2026; Bank of England (Prudential Regulation Authority), PS9/24 - Implementation of the Basel 3.1 standards near-final part 2, 12 September 2024; Federal Reserve Board, Board memo: Basel III proposal, GSIB surcharge proposal, and standardized approach proposal, 19 March 2026; Federal Reserve Board, FDIC and OCC, Fact sheet: Proposals to modernize the regulatory capital framework, 19 March 2026.

The measures in the table are not strictly comparable, since they differ in capital tier, sample and treatment of transitional arrangements. They nonetheless show the US moving in the opposite direction from the other large jurisdictions. The numbers explain the political economy. Board staff estimate that aggregate CET1 requirements for Category I and II firms would fall by 2.4%: the Basel III proposal adds 1.4%, mainly from higher requirements for trading activities that are mostly offset by lower requirements for traditional lending, and the surcharge proposal subtracts 3.8%. Including proposed stress test changes, the reduction is 4.8%, and with the recently finalised changes to the enhanced supplementary leverage ratio, tier 1 requirements for these firms would fall by 6.0%. For Category III and IV firms, a 6.1% reduction from risk-weight changes is partly offset by a 3.1% increase from recognising AOCI, for a net fall of 3.0%, or 5.2% with stress test changes. Smaller banks would see a 7.8% reduction. The agencies say overall capital would modestly decrease but remain substantially higher than before the financial crisis, and staff note that large banks have more than doubled their capital since then, an increase of more than $1 trillion. The leverage changes finalised on 25 November 2025 take effect on 1 April 2026, with optional adoption from 1 January 2026, and reduce tier 1 requirements for affected holding companies by less than 2%. This points to a US framework that would formally adopt the Basel architecture but at a lower overall calibration than the standard's other adopters.

Simplification and the level playing field

The US proposals land in a wider debate about simplification. On 11 December 2025 the European Central Bank's Governing Council endorsed recommendations to reduce the number of elements in the risk-weighted and leverage ratio framework. They include merging capital buffers into just two, a non-releasable and a releasable buffer, and cutting the leverage ratio framework from four elements to two: a 3% minimum and a single buffer. The ECB also said all jurisdictions should ensure full, timely and faithful implementation of Basel III, and that it would present its proposals to the European Commission for its 2026 report on the banking system.

The Commission launched a targeted consultation and call for evidence on the competitiveness of the EU banking sector on 11 February 2026, and its report is scheduled for Q3 2026. On 9 February 2026 the EBA opened a consultation on simplifying the credit risk framework, an area that has accumulated a particularly large number of mandates under the EU Banking Package; it runs until 10 May 2026. These steps are framed as simplification within the existing rules, but they create room for recalibration that markets will watch closely.

The Basel Committee's own messaging is cautious. Its Secretary General said in December 2025 that simplification should not be equated to deregulation, and that full and consistent implementation will be more difficult if the standards become a moving target. The Committee is nonetheless simplifying its own guidance, with a consolidation expected to reduce its volume by around 75%. In March 2026 GHOS also endorsed two targeted reviews, one of the cryptoasset standard and one of the governance and transparency of the G-SIB assessment methodology.

Outlook and risks

Three risks stand out for the year ahead. The first is fragmentation in market risk. With the revised market risk standards in effect in nearly 40% of member jurisdictions, the EU on 1 January 2027 for FRTB and the UK's model approach on 1 January 2028, banks with large trading books face different rules in different hubs until at least 2028. The Commission has twice tied its timetable to developments elsewhere, which suggests the US comment process will set the pace for others.

The second is the output floor. The EBA projects 33 EU institutions bound by the floor at full implementation, against 2 at December 2025, while Canada has held its floor at 67.5% until further notice. If the US framework finalises without an equivalent constraint, pressure on the floor elsewhere is likely to grow. The third is the simplification agenda: GHOS has reaffirmed full and consistent implementation, but it is now one of several voices, alongside the ECB and the Commission, weighing how far to streamline.

For bank executives, the practical message is that the capital cost of Basel III has largely been absorbed, with a reported shortfall of €1.0 billion and EU shortfalls not emerging before 2030 on a static balance sheet. The remaining work is operational: running dual market risk systems in the UK, preparing for FRTB in the EU and tracking a US rule whose final shape will not be known until after 18 June 2026. Year one has shown that the standard is broadly in place; year two will show whether it remains a common one.

Primary sources: Basel Committee on Banking Supervision (BIS), Governors and Heads of Supervision welcome progress to implement Basel III and discuss elements of the Basel Committee's work programme, 9 March 2026; Bank for International Settlements (Secretary General of the Basel Committee), Just get it done (remarks at the 20th High-Level Meeting on Financial Stability and Regulatory and Supervisory Priorities), 10 December 2025; European Commission (DG FISMA), Commission proposes to postpone by one additional year the market risk prudential requirements under Basel III, 12 June 2025; Basel Committee on Banking Supervision (BIS), Basel III monitoring report (data as of 30 June 2025), 24 March 2026; Bank of England (Prudential Regulation Authority), The PRA announces a delay to the implementation of Basel 3.1, 17 January 2025; Federal Reserve Board, FDIC and OCC, Agencies request comment on proposals to modernize the regulatory capital framework and maintain the strength of the banking system, 19 March 2026; European Banking Authority, The European banking sector enters period of geopolitical uncertainty from a position of strength (Q4 2025 Risk Dashboard and CRR3/CRD6 dashboard), 23 March 2026; Bank of England (Prudential Regulation Authority), PS1/26 - Implementation of Basel 3.1: Final rules, 20 January 2026; Federal Reserve Board, Board memo: Basel III proposal, GSIB surcharge proposal, and standardized approach proposal, 19 March 2026; Financial Services Agency (Japan), FSA Weekly Review No.517: Publication of the finalized amendments to the regulatory notice pertaining to Pillar 1 and Pillar 3 requirements of capital adequacy, 30 November 2022; State Secretariat for International Finance (Switzerland), Federal Council confirms implementation of final Basel III standard with effect from 1 January 2025, 26 June 2024; Government of the Hong Kong SAR (with the Hong Kong Monetary Authority), Banking (Capital) (Amendment) Rules 2023 (Commencement) Notice 2024 gazetted, 10 October 2024; Basel Committee on Banking Supervision (BIS), Basel Committee reports further progress on Basel III implementation, 3 October 2025; Bank for International Settlements (Chair of the Basel Committee), Implementation, innovation and interconnections (keynote remarks), 15 October 2025; Basel Committee on Banking Supervision (BIS), Governors and Heads of Supervision reaffirm expectation to implement Basel III and discuss work on financial impact of extreme weather events, 12 May 2025; Basel Committee on Banking Supervision (BIS), Basel Committee continues to prioritise Basel III implementation, approves final principles on third-party risks and agrees to expedite targeted review of cryptoasset standard, 19 November 2025; Office of the Superintendent of Financial Institutions (Canada), Consultation: Draft Capital Adequacy Requirements (CAR) Guideline, 20 February 2025; Basel Committee on Banking Supervision (BIS), Basel III liquidity indicators increase slightly while risk-based capital and leverage ratios are stable for large internationally active banks, latest Basel III monitoring exercise shows, 24 March 2026; European Banking Authority, Further Tier 1 capital needs for the full implementation of the EU specific Basel III reform are minimal, the EBA Report finds, 4 October 2024; Federal Reserve Board, FDIC and OCC, Agencies request comment on proposed rules to strengthen capital requirements for large banks, 27 July 2023; Federal Reserve Board, FDIC and OCC, Fact sheet: Proposals to modernize the regulatory capital framework, 19 March 2026; Bank of England (Prudential Regulation Authority), PS9/24 - Implementation of the Basel 3.1 standards near-final part 2, 12 September 2024; Federal Reserve Board, FDIC and OCC, Agencies issue final rule to modify certain regulatory capital standards, 25 November 2025; European Central Bank, Governing Council proposes simplification of EU banking rules, 11 December 2025; European Commission (DG FISMA), European Commission launches consultation/call for evidence on competitiveness of EU banking sector, 12 February 2026; European Banking Authority, The EBA launches consultation on simplifying the credit risk framework, 9 February 2026.