The Basel Committee on Banking Supervision issued the Basel III: Finalizing post-crisis reforms in December 2017, which includes among others, the requirements for output floor, which aims to reduce excessive variability of Risk- Weighted Assets “RWA” and to enhance the comparability of risk-weighted capital ratios. Under these requirements, banks using internal models to derive RWAs will be subject to a floor requirement that is applied to RWAs. The output floor will ensure that banks' capital requirements do not fall below a certain percentage of capital requirements derived under standardized approaches.
