Banks fail when an illiquidity event depletes capital reserves. Liquidity is sourced from assets that can readily be transformed into cash or from wholesale funding markets and central banks. Basel III strengthens bank balance sheets by allowing supervisors to release capital and liquidity reserves during times of market liquidity stress. This chapter analyzes the implementation of the Basel III capital and liquidity reforms in Hong Kong, banking sector stability during the 2008–9 global financial crisis and the Covid-19 pandemic, and systemic supervision. Hong Kong is a unique international financial centre because it is overwhelmingly populated by domestic systemically important banks. Universal banking and Basel III compel banking sector supervision of Hong Kong’s securities and insurance sectors, despite falling outside the supervisory design of the Hong Kong Monetary Authority. This chapter argues that different supervisory structures and models affect the regulation and supervision of financial stability in Hong Kong’s banking sector. Insurance and wealth management products in the banking industry can produce systemic risks that might be overlooked by the Hong Kong Monetary Authority. Supervisory bias towards the banking sector in conjunction with cross-sectoral underlap could cause financial instability and a systemic banking crisis in Hong Kong.