What is the main focus of Basel III?

The primary focus of Basel III is on strengthening bank capital requirements. This framework was developed in response to the financial crisis of 2007-2008 to ensure that banks maintain adequate capital buffers to absorb shocks during economic downturns. By increasing the amount of capital that banks are required to hold, Basel III aims to enhance the stability and resilience of the banking sector, thereby reducing the likelihood of bank failures and the systemic risks they pose to the financial system.

The emphasis on capital strength also includes stricter definitions of what constitutes capital, introducing higher quality capital requirements, and establishing minimum leverage ratios. This comprehensive approach ensures that banks are better positioned to withstand financial stress, which contributes to the overall health of the economy and protects depositors.

The other options refer to important financial concepts but do not encompass the central aim of Basel III. Minimizing the number of banks or regulating trading practices do not align with the fundamental objective of enhancing capital standards. Similarly, while increasing transparency in financial transactions is crucial, it is not the main focus of Basel III, which is primarily concerned with the capital framework for banks.