Interview with Sylvie Matherat, Global Senior Adviser at Forvis Mazars, on the finalisation of Basel III

Conducted by David Ciolfi, Senior Manager, Forvis Mazars RegCentre

On 12 May 2025, the Basel Committee issued a landmark statement reaffirming its commitment to finalise the full implementation of Basel III in all jurisdictions “in full and consistently and as soon as possible”[1]. This position comes amid growing tensions between the ambition for a globally harmonised prudential framework and national political realities, particularly in the United States, where the so-called “Basel 3 Endgame” reform is the subject of intense debate.

Beyond political intent, this dynamic calls for technical and strategic reading: how can the effectiveness of a global framework be guaranteed if its implementation becomes asymmetrical? What are the risks for financial stability and competition between international banks?

To answer these questions, we collected the thoughts of Sylvie Matherat, Global Senior Adviser at Forvis Mazars. Sylvie is widely recognised for her expertise in international banking regulation, having served on the Basel Committee and currently holding several board positions. In this interview, she shares her insights on the challenges and prospects for the global finalisation of Basel III, a topic of strategic importance for the banking sector and financial stability worldwide.

“The more you delay Basel III implementation, the more you ran the risks that it should not be appropriate anymore to the current risks banks are facing.”

Sylvie Matherat, Global Senior adviser, Forvis Mazars Group

The Committee has broadened the spectrum of risks and published new methodologies and technical amendments. What do you see as the most significant recent developments in Basel III supervision? Is it a call for consistency?

The Basel Committee’s official publications in recent months confirm a strong political will to finalise Basel III, while broadening the spectrum of risks considered in the prudential framework. The implementation monitoring methodology has also been made public[2], notably for the sampling of banks (G-SIBs, regional banks, etc.), the metrics used to assess ratios, the aggregation methods and the quantitative impact of regulatory adjustments on capital requirements.

To facilitate this implementation and ensure consistent implementation of the Basel III framework worldwide, the Committee also provided clarifications[3], as well as minor technical amendments and answers to a series of frequently asked questions, particularly in relation to operational risk.

In parallel with these clarifications and reminders of the need for Basel III, the Committee’s news has been enriched by various technical publications. First, the Committee recently returned to the upcoming finalisation of the principles governing third-party risks[4], in connection with the growing outsourcing of critical functions. Second, the Committee released a horizon scanning report exploring the increasing links between banks and non-bank financial entities[5], which proposes avenues for enhanced prudential supervision. This also enabled the Committee to identify plausible stress scenarios related to these interconnections and to highlight the risks of contagion, illiquidity and regulatory arbitrage.[6]

This series of publications illustrates the Committee’s commitment to maintaining a strong, even enhanced, level of supervision. In a statement issued following the meeting of the GHOS (Group of Central Bank Governors and Heads of Supervision), supervisors unanimously reaffirmed their commitment to implementing all Basel III reforms in a comprehensive, consistent and timely manner. According to the committee, 70% of jurisdictions have already implemented or are in the process of implementing the standards. The GHOS also approved the upcoming publication of a voluntary framework for climate risk disclosure (Pillar 3) and asked the Committee to prioritise the analysis of risks related to extreme weather events. In addition, the Committee assures that the components of the framework functioned well during the banking turmoil of 2023. The Committee also reiterated the need to strengthen the effectiveness of supervision, arguing that priority should be given to finalising Basel III, despite differences in timelines between jurisdictions. To do so, supervision must be able to rely on more dynamic monitoring tools.

Overall, the Committee issued a strong call for collective responsibility, emphasising the credibility of the prudential framework, which must be based on full, consistent and undiluted implementation. It warned against the risks of fragmentation and loss of confidence in prudential ratios.

The U.S. is facing political and regulatory obstacles in finalising Basel III. How do you interpret the current U.S. position and what impact could it have on the credibility of the global framework?

The finalisation of Basel III, known in the United States as the “Basel III Endgame,” is now crystallising increasingly vocal political opposition, particularly since President Trump’s return to the White House. While U.S. regulators (FED, OCC, FDIC) launched a public consultation in 2023 on the adoption of the final components of Basel III, notably the output floor, the revision of internal models and the strengthening of capital requirements for large banks, the process has been met with political and industry backlash. In recent discussions with FED representatives, the Republican president reportedly called for a freeze or even an outright abandonment of the Basel III finalisation process in the United States.

To reach that goal, Michelle Bowman was appointed FED Vice-chair for supervision by the President in replacement of Michael S. Barr. Vice-chair Bowman’s position is considered more pragmatic by the President and more in tune with the relaxation of the Dodd-Frank Act and the reduction of requirements for mid-sized banks. President Trump has also shown some disagreement with FED’s currents monetary policy.

From a regulatory perspective, it creates major uncertainty about the timing and scope of application of international standards in the United States and reflects a deep divide between regulators and politicians. From a geopolitical perspective, it weakens the credibility of the global prudential framework by sending a signal of disengagement from the world’s leading financial power. Finally, from an economic perspective, it raises concerns about the resilience of the U.S. banking system, particularly in the face of interest rate, liquidity and sector concentration risks.

In this context, the U.S. position could compromise the Basel Committee’s goal of international consistency and raises the fundamental question of whether a global prudential framework can survive the political fragmentation of major jurisdictions.

The UK adjusted its Basel III implementation timelines. What are the strategic reasons behind this decision and what are the next steps?

With regard to the finalisation of Basel III, the UK authorities have adopted a position of strategic caution, maintaining their commitment in principle while adjusting the implementation timetable. According to the latest communications, the UK has not yet finalised all the regulatory texts necessary for the full implementation of the framework, particularly with regard to the new market risk rules, whose entry into force could be postponed to 2027 and 2028 for market risk[7].

This approach reflects a desire to preserve the competitiveness of the City of London while complying with international standards. It also fits into a political context marked by increased attention to the potential impacts on the financing of the real economy and on small banks. The UK regulator, the Prudential Regulation Authority (PRA), seems to favour a gradual implementation, with in-depth technical consultations and adaptation to the specificities of the local market. This position, although less radical than that of the United States, contributes to questions about the overall consistency of the prudential framework.

In recent months, the EU postponed the implementation of certain Basel III rules and introduced adjustments to its environmental directives through the Omnibus package. Do you see these developments as a strategic shift in the EU’s regulatory approach?

While the European Union applies Basel III since January 1, 2025, the European Commission has adopted a second delegated act postponing the entry into force of the market risk rules until January 1, 2027, motivated by the desire to preserve an international level playing field. This illustrates a form of regulatory realism, but also a tension between regulatory ambition and competitiveness constraints. The so-called FRTB[8], the most technical and sensitive part of Basel III, was first postponed to 2026, then to 2027, reflecting the difficulties of international alignment and political trade-offs within the EU.

At the same time, the Omnibus package, published in the Official Journal in April 2025, introduces significant adjustments to the Green Deal’s environmental directives, notably the CSRD and the green taxonomy. This move, presented as administrative simplification, is perceived by some as a strategic retreat from the initial ESG ambitions, in the name of economic sovereignty and industrial competitiveness.

These two developments reflect a shift in the European regulatory trajectory. They raise questions about the overall consistency of the prudential framework and the EU’s ability to maintain its normative leadership in a context of international fragmentation.

What are the consequences of regulatory fragmentation for European banks and what steps should be taken to mitigate competitive distortions and maintain confidence in prudential ratios?

In response to these tensions, some are calling for the Basel Committee to be strengthened with more binding monitoring mechanisms, or even symbolic sanctions in the event of non-compliance. Other solutions mentioned include closer coordination between the EBA, the ECB and U.S. regulators to limit divergences. Nevertheless, these divergences suggest that the legitimacy of international prudential standards, developed by non-binding bodies, could return to the centre of the debate.

As such, in the United States, supervision is expected to become more accommodating, particularly with the anticipated relaxation of the Comprehensive Capital Analysis and Review (CCAR) requirements. This shift could result in a more flexible supervisory environment for U.S. banks. In contrast, Europe’s supervisory landscape remains complex and fragmented. While the European Central Bank (ECB) acts as a unified supervisor for significant institutions, national supervisory authorities continue to exert considerable influence, leading to variations in supervisory practices across member states. As a result, European supervision tends to be more restrictive and less harmonised, despite efforts to create a single supervisory mechanism.

Those differences in both regulatory implementation and supervisory rigor can further exacerbate competitive imbalances between U.S. and European banks. The risk is that supervisory fragmentation and regulatory easing in the U.S. may undermine the level playing field that Basel III aims to establish, making it even more challenging for European banks to compete globally. In this context, it would be desirable for the European regulator to explicitly consider competitiveness as a strategic objective, as the UK authorities have done. By integrating competitiveness into the regulatory agenda, the European Union could help ensure that its banks remain resilient and stable, while also being able to compete effectively on the international stage. This approach would support a more balanced framework, where prudential soundness and economic dynamism are not mutually exclusive, but rather complementary goals.

In this context, European banks must anticipate several risks and find themselves in a situation of extreme vigilance. First, there is a risk of competitive distortion, because if the requirements are applied differently, European banks could find themselves at a disadvantage in certain markets. Furthermore, inconsistent implementation would weaken the comparability of ratios and confidence in bank balance sheets. Finally, a partial challenge to Basel III by a major jurisdiction could undermine the entire system and lead to a revision of the framework.

The finalisation of Basel III is therefore not just a technical issue. It is a test of credibility for prudential global architecture. Against a backdrop of rising geopolitical risks, transforming banking models and increasing political pressure, maintaining a consistent, robust and fair framework is more essential than ever.

Looking ahead, do you believe Basel III will remain relevant in the current environment? What is your vision for the way forward?

We shall keep in mind that the Basel III framework was born out of the lessons of the Great Financial Crisis, with the aim of reinforcing the resilience and stability of the global banking system. Yet, more than fifteen years later, its full implementation remains incomplete in several jurisdictions. This delay raises a critical concern: the longer Basel III is postponed, the greater the risk that its provisions may become misaligned with the evolving nature of financial risks.

While recent amendments have sought to reflect new vulnerabilities, such as those linked to climate, digitalisation and market volatility, timely and coordinated implementation is essential. Regulatory accuracy must go hand in hand with consistency across jurisdictions to preserve a level playing field and ensure that the framework remains both relevant and effective in safeguarding financial stability.

[1] Governors and Heads of Supervision reaffirm expectation to implement Basel III; [2] Methodology of Basel III monitoring analysis; [3] Various technical amendments and FAQs; [4] Basel Committee discusses finalization of principles on third-party risks; [5] Banks’ interconnections with non-bank financial intermediaries; [6] Press release: Governors and Heads of Supervision reaffirm expectation to implement Basel III and discuss work on financial impact of extreme weather events; [7] P17/25 – Basel 3.1: Adjustments to the market risk framework; [8] FRTB: Fundamental Review of the Trading Book