Subject The article examines the key aspects of Basel III relating to bank capital, its management, capital adequacy requirements, and the structure of capital base. It also analyzes the innovations as compared to the previous version of the Accord, and discusses possible implications of Basel III introduction and its shortcomings. Objectives The aim of the work is to compare Basel III and Basel II in terms of provisions relating to regulation of bank capital. The tasks of the study are to identify the key provisions of Basel III that relate to bank capital; to analyze the innovations of Basel III in comparison with Basel II; to consider possible implications of the introduction of Basel III; to identify major shortcomings of Basel III. Methods The methods used in the study include the systems and logical analyses, comparisons and generalizations. Results I found out that Basel III complements the provisions of Basel II without canceling them. However, the provisions of Basel III ceased to be advisory in nature, as it was in Basel II, but the penalties for non-compliance are too soft. Furthermore, I identified major weaknesses of Basel III: it does not include insurance companies, thus giving them great advantages; it does not regulate the relationships between the Accord and local legal acts; it does not introduce penalties for non-compliance with its provisions. Conclusions and Relevance I conclude that the provisions of Basel III will strengthen the global financial system, its ability to confront new crises. However, at the same time the document will create considerable difficulties in lending and lead to a reduction in GDP growth of those countries that follow its recommendations.
Keywords: Basel II, Basel III, bank capital, capital conservation buffer, countercyclical buffer
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