What major update did Basel III introduce to banking requirements?

The major update introduced by Basel III to banking requirements was the increase in capital adequacy ratios. This reform was implemented to strengthen the resilience of banks against economic shocks and to enhance the banking sector's overall stability. Higher capital adequacy ratios mean that banks are required to hold more capital relative to their risk-weighted assets, which improves their ability to absorb losses and reduces the likelihood of insolvency during financial downturns.

By raising the minimum capital requirements, Basel III aimed to ensure that banks have adequate buffers to withstand economic stress. This is particularly critical in preventing systemic risks that can arise from bank failures. The updates implemented by Basel III also included adjustments in how banks calculate their capital ratios, ensuring they are based on more stringent criteria.

In contrast, the other options reflect principles that are inconsistent with the objectives of Basel III. The framework aimed to enhance, not reduce, the regulatory standards for liquidity, operational risk management, and global coordination among banking regulations.