This lesson examines the major regulatory frameworks governing financial services globally. These frameworks are consistently identified across curricula as essential knowledge .

6.1 The Basel Framework
The Basel Accords are the primary international regulatory framework for banks . Basel I introduced risk-weighted assets and minimum capital requirements. Basel II expanded to three pillars: minimum capital, supervisory review, and market discipline. Basel III tightened capital and liquidity requirements, introducing the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) . Basel standards are implemented in Europe through the Capital Requirements Regulation (CRR) and Directive (CRD IV) . Students must understand the relationship between Basel, CRR, and national implementations .

6.2 The Dodd-Frank Act (US)
The Dodd-Frank Wall Street Reform and Consumer Protection Act was the US response to the 2008 crisis . Key provisions include: the Volcker Rule (restricting proprietary trading), the establishment of the Consumer Financial Protection Bureau (CFPB), enhanced supervision of systemically important financial institutions, and resolution authority for failing institutions . Students must differentiate between US and European regulation—Dodd-Frank, Basel III, CRR, and MiFID—and the different philosophies underlying each framework .

6.3 MiFID II and European Frameworks
The Markets in Financial Instruments Directive II (MiFID II) is the cornerstone of European securities regulation . It mandates transparency and investor protection, covering pre- and post-trade transparency, product governance, and inducement rules . Other key European frameworks include: EMIR (European Market Infrastructure Regulation) for derivatives and central counterparties; SFTR (Securities Financing Transactions Regulation) for transparency in securities financing; and the BRRD (Bank Recovery and Resolution Directive), establishing resolution regimes for failing banks . The interplay between Banking Union and Capital Markets Union (CMU) is a key topic in European regulation .