Basel Committee

BCBS Issues Revisions to Basel Securitization Framework

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The Basel Committee on Banking Supervision (“BCBS“) issued revisions to the Basel II securitization framework on December 11.

 The framework, which comes into effect in January 2018, forms part of the BCBS’s broader Basel II agenda to reform regulatory standards for banks in response to the global financial crisis. The revisions aim to address a number of shortcomings in the securitization framework highlighted by the financial crisis and strengthen the capital standards for securitization exposures held in the banking book.

 The final requirements set out in the framework incorporate feedback to two rounds of consultation in 2012 and 2013 and take account of two quality impact studies undertaking during those consultations. Compared to the 2013 proposals, this final set of requirements includes amendments that smooth the impact of maturity on capital charges, as well as technical enhancements and clarifications.

G20 Communiqué and FSB Progress Report

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The G20 Finance Ministers and Central Bank Governors have published a communiqué following their meeting in Moscow on February 15 and 16.  The communiqué sets out the G20’s policy agenda for reforming financial regulation, which includes:

  • Welcoming the Basel Committee’s increased focus on the comparability of risk-weighted assets.
  • Reiterating the G20’s commitment to ensuring that all global systemically important financial institutions are capable of resolution, and that operational resolution plans for all globally systemically important banks should be developed by the end of June 2013.
  • Stating that the FSB will continue to coordinate the monitoring of implementation of OTC derivative reforms, and with the aid of the Legal Entity Identifier global system which will be launched in March 2013.

Prior to the G20 summit, the FSB published a progress report on financial regulatory reforms, which emphasised that, with risk appetite beginning to return to the financial markets, the FSB’s priorities are completing the G20’s agreed reforms to the OTC derivatives markets, strengthening the oversight and regulation of the shadow banking sector and developing credible policies for ending the concept of “too-big-to-fail.”  The FSB’s report also provided an update on the implementation of the Basel III reforms, the reforms to reduce reliance on Credit Rating Agencies and the resolution regimes.

Basel Committee FAQs on Basel III Counterparty Credit Risk Rules

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On July 25, the Basel Committee issued a second set of frequently asked questions on Basel III’s counterparty credit risk rules, updating the questions published in November 2011. The FAQs relate to counterparty credit risk, including the default counterparty credit risk charge, the credit valuation adjustment and asset value correlations. Release. FAQs.

Basel Committee Interim Rules on Bank Exposure to CCPs

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On July 25, the Basel Committee issued interim rules as part of Basel III for the capitalization of bank exposures to central counterparties (“CCPs”). The interim rules are intended to create incentives for banks to increase their use of CCPs, while also ensuring that banks’ exposures to CCPs are adequately capitalized. The rules will be effective as of January 2013. Release. Interim Rules.

Basel Consultative Document on Trading Book Capital Requirements

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On May 3, the Basel Committee on Banking Supervision issued a consultative document on the fundamental review of trading book capital requirements. The consultative document proposals include: (i) a more objective boundary between the trading book and banking book that reduces the scope for regulatory arbitrage; (ii) moving from value-at-risk to expected shortfall to better capture tail risk; (iii) calibrating the revised framework to a period of significant financial stress; (iv) incorporating the risk of market illiquidity; (v) measures to reduce model risk; and (vi) a revised standardized approach that is intended to be more risk-sensitive. Comments must be submitted by September 7.  Basel Release.

Text of Basel III Rules

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On December 16, the Basel Committee issued the text of the Basel III rules that present global regulatory standards on bank capital adequacy and liquidity, along with the results of its comprehensive quantitative impact study. Basel Press Release. Basel International Framework for Liquidity Risk. Basel Global Regulatory Framework. Quantitative Impact Study Results.

Agencies Seek Comment on Capital Rules

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On December 15, the Fed, OCC, and FDIC requested comments on a proposed rule that would implement changes approved by the Basel Committee on Banking Supervision to revise the market risk capital rules for banking organizations with significant trading activity. Comments are requested within 90 days after publication in the Federal Register. The Fed, OCC, and FDIC also requested comments on a proposed rule that would amend Basel II to be consistent with the Dodd-Frank Act provisions on capital standards. Comments are requested within 60 days after publication in the Federal Register. Agencies Risk-Based Capital Guidelines Release. Agencies Basel II Release.