Is the World Falling Into Another Banking Crisis?

Key Takeaways 

• Countries are now pushing back against Basel III banking rules. The US and UK have delayed or weakened key parts of the framework that was meant to make banks safer after the 2008 crisis. 
   
• The Basel III rules were finalised in 2017 by the Bank for International Settlements (BIS). They required banks to hold much more capital as a safety buffer against losses. 

Why the World’s Banking Rules Are Under Fire Now?

Basel III has guided how banks around the world manage risk for nearly two decades. But now, that global framework is starting to weaken. The US Federal Reserve delayed its “Basel III endgame” reforms in 2024. The UK has also relaxed some capital requirements. This matters because weaker rules in one country can attract risky activity there, creating gaps in the overall system.

The short-term risk is clear. If major economies do not follow the same rules, regulators lose proper oversight. A bank can move operations to a country with easier regulations. This is similar to what happened before the 2008 financial crisis. In the long term, a fragmented system makes it harder to respond effectively when the next crisis occurs.

How does this hit Indian Banks and Borrowers?

India’s banks are largely protected for now. The Reserve Bank of India (RBI) has been following Basel III norms since 2013. Indian public sector banks have steadily improved their Capital to Risk-weighted Assets Ratio (CRAR). As of March 2024, the CRAR of scheduled commercial banks stood at 16.8%, which is well above the 11.5% minimum set by the RBI. 

But a global pullback in regulations can still affect Indian borrowers. If foreign banks operating in India face easier rules in their home countries, they may take on more risk here as well. This could lead to cheaper loans in the short term, but it may also increase the risk of bad debt cycles over time. 
 

India stands out as one of the few major economies fully committed to the rules while Western nations step back.

What Experts Are Saying and What Needs to Change?

Agustín Carstens, the head of BIS, warned in early 2025 that “fragmenting global standards risks recreating the fault lines that caused the 2008 crisis.” He asked G20 countries to stick to their agreed timelines. The IMF also flagged in its April 2024 Global Financial Stability Report that countries drifting apart on rules is “a growing source of systemic risk.”

Most experts say the fix is simple, and that is to make compliance public. The Financial Stability Board (FSB) has suggested publishing yearly scorecards showing which countries are following the rules and which are not. This would make it harder for governments to quietly opt out. For India, staying compliant is actually a strength. It makes Indian banks look more trustworthy to global investors.

Conclusion 

The global debate over banking rules is not just about numbers on paper. It is about whether countries can still trust each other’s financial systems. India is in a strong position today. But what happens in Washington, D.C., London, and Brussels will decide how much financial risk reaches India in the coming years. 

Frequently Asked Questions 

1. Why are countries delaying the final Basel III rules globally?
Many countries, especially the United States and the United Kingdom, are delaying or softening the final Basel III rules to support their banks and economic growth. Stricter rules can reduce bank lending and profitability, so regulators are taking a cautious approach.

2. How do changes in US Basel III rules affect banks and gold markets?
The changes in US Basel III rules can influence how banks manage their capital and assets. If rules are relaxed, banks may take more risk and increase lending. This can impact gold demand indirectly, as gold is often seen as a safe asset during financial uncertainty.