EU AI Act
EU regulation for risk-based AI safety and governance
Basel III
Global framework for bank capital, leverage, liquidity standards
Quick Verdict
EU AI Act regulates high-risk AI systems EU-wide via conformity and transparency, while Basel III mandates bank capital, leverage and liquidity globally. Companies adopt AI Act for market access, Basel for prudential resilience and supervisory compliance.
EU AI Act
Regulation (EU) 2024/1689 Artificial Intelligence Act
Key Features
- Risk-based four-tier AI classification framework
- Prohibits unacceptable-risk AI practices outright
- High-risk systems require conformity assessment, CE marking
- General-purpose AI models face dedicated obligations
- Phased implementation over 6-36 months timeline
Basel III
Basel III: international regulatory framework for banks
Key Features
- 4.5% CET1 minimum capital ratio with quality focus
- 3% non-risk-based leverage ratio backstop
- Liquidity Coverage Ratio for 30-day stress survival
- Net Stable Funding Ratio for one-year resilience
- Capital buffers with automatic distribution constraints
Detailed Analysis
A comprehensive look at the specific requirements, scope, and impact of each standard.
EU AI Act Details
What It Is
Regulation (EU) 2024/1689, the EU AI Act, is a comprehensive horizontal regulation establishing risk-based rules for AI systems. Its primary purpose is to ensure AI safety, transparency, and fundamental rights protection across sectors, applying to providers and deployers in the EU or using outputs there. Key approach: four-tier risk classification (unacceptable, high, limited, minimal).
Key Components
- Prohibited practices (Chapter II), high-risk requirements (Chapter III: risk management, data governance, documentation, oversight, cybersecurity), transparency duties (Chapter IV), GPAI obligations (Chapter V).
- Over 100 articles with lifecycle controls, conformity assessments, CE marking.
- Built on product-safety principles; presumption of conformity via harmonized standards.
- Hybrid enforcement: AI Office, national authorities.
Why Organizations Use It
Mandated for in-scope AI to avoid fines up to 7% global turnover. Drives risk management, market access, trust in high-stakes sectors like healthcare, finance. Enhances product quality, vendor compliance, global competitiveness via "Brussels Effect".
Implementation Overview
Phased rollout (6-36 months); inventory AI assets, classify risks, build RMS/QMS, conduct assessments, register systems. Applies universally to AI value chain; high-resource for high-risk. No central certification but notified bodies for assessments.
Basel III Details
What It Is
Basel III is the international regulatory framework developed by the Basel Committee on Banking Supervision (BCBS) post-global financial crisis. This prudential standard strengthens bank resilience by enhancing capital quality and quantity, introducing leverage constraints, and mandating liquidity buffers. Its risk-based approach combines risk-weighted assets (RWA) metrics with non-risk-based backstops.
Key Components
- **Three PillarsPillar 1 (capital, leverage, liquidity ratios), Pillar 2 (supervisory review/ICAAP), Pillar 3 (disclosures).
- Core ratios: CET1 4.5%, Tier 1 6%, Total Capital 8%, plus buffers (2.5% CCB, CCyB, G-SIB); Leverage 3%; LCR/NSFR 100%.
- Built on revised RWA methods, output floor, standardized approaches; compliance via national implementation, no central certification.
Why Organizations Use It
Banks adopt for mandatory regulatory compliance in most jurisdictions, reducing crisis vulnerabilities, constraining leverage, improving liquidity. Benefits include enhanced resilience, better risk comparability, strategic balance-sheet optimization, investor trust via disclosures.
Implementation Overview
Phased enterprise transformation: gap analysis, data/system upgrades, governance, training. Targets internationally active banks globally; involves QIS, parallel runs, ongoing supervisory engagement.
Key Differences
| Aspect | EU AI Act | Basel III |
|---|---|---|
| Scope | AI systems by risk tiers across lifecycle | Bank capital, leverage, liquidity standards |
| Industry | All sectors using AI in EU | Banking and financial institutions globally |
| Nature | Mandatory EU regulation with conformity | Global prudential standards implemented nationally |
| Testing | Conformity assessments, notified bodies | Stress tests, ICAAP, supervisory review |
| Penalties | Up to 7% global turnover fines | Capital add-ons, business restrictions, fines |
Scope
Industry
Nature
Testing
Penalties
Frequently Asked Questions
Common questions about EU AI Act and Basel III
EU AI Act FAQ
Basel III FAQ
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