Basel Committee on Banking Supervision

BCBS Publishes Report on Outcome of February 2019 Meeting

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From the February 27 to 28 meeting, the Basel Committee on Banking Supervision (BCBS) has published this press release with the outcome.

At the meeting the Committee:

  • Agreed to publish high-level supervisory expectations related to crypto-assets considering the high degree of risks associated with such exposures. These expectations will be published in March.
  • Reiterated its support for reforms of interest rate benchmarks and approved a work plan to look at the interactions with supervisory requirements.
  • Agreed to publish, in March, a summary of the different practices used by jurisdictions to proportionately apply the global minimum prudential standards.
  • Announced it would publish, in March, a joint statement with the International Organization of Securities Commissions (IOSCO) clarifying certain implementation aspects of the margin requirements framework.

U.S. Banking Agencies Support Conclusion of Reforms to International Capital Standards

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On December 7, 2017, the United States banking agencies announced their support for the conclusion of efforts to reform the international bank capital standards initiated in response to the global financial crisis.  The Group of Central Bank Governors and Heads of Supervision and the Basel Committee on Banking Supervision announced the finalization of the reforms to the “Basel III” agreement on bank capital standards.  With this agreement, the Basel Committee will bring to conclusion the international reforms initiated in response to the global financial crisis.  Press Release.

EBA Amends Historical Look-Back Approach Method for Calculating Additional Collateral Outflows

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On May 3, 2016, the European Banking Authority (EBA) issued an opinion to the European Commission supporting the Commission’s proposed amendment to the historical look-back approach (HLBA) methodology used in the draft Regulatory Technical Standards (RTS) on additional collateral outflows.

The amendment by the EBA followed a request by the European Commission that the draft RTS be amended so that the calculation of the additional collateral outflows was based on the HLBA for market valuation changes developed by the Basel Committee on Banking Supervision (BCBS). The BCBS’s HLBA focuses on the largest net difference in collateral posted instead of the largest gross difference which had been the focus of the EBA’s approach.  In December 2015, the Commission had raised concerns that the EBA’s HLBA approach could have a significant impact on credit institutions and international derivative markets.  Therefore, it decided not to adopt the draft RTS as it had been submitted by the EBA, but signalled it was open to endorsing an amended draft RTS based on the BCBS’s HLBA approach.

European Commission Issues Call for Advice on Own Fund Requirements for Market Risk

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On April 22, 2016, the European Banking Authority published a call for advice it had received from the European Commission regarding revisions to the own fund requirement for market risk as part of the CRR review.

The call for advice sets out that the EC is undertaking a review of the Capital Requirements Regulation and is considering the impact of implementing the agreed Basel Committee on Banking Supervision framework detailed in the document “Minimum capital requirements for market risk.” The EC notes that to date there has been no EU-specific assessment of the convenience and impact of updating these rules in the ways proposed by the BCBS.

BCBS Reports on Regulatory Consistency of Risk-Weighted Assets for Credit Risk in the Banking Book

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On April 1, the Basel Committee on Banking Supervision (“BCBS”) issued its second report: an analysis of risk-weighted assets (“RWA”) for credit risk in the banking book.

The report’s first objective is to identify the main drivers of RWA variation and evaluate their effects. The report distinguishes between risk-based drivers (i.e. those drive by underlying differences in risk) and practice-based drivers (i.e. those that reflect differences in bank practices and regulatory environments). The second objective of the report is to highlight where there is potential to modify current standards either to reduce practice-based RWA variation or to simplify the capital framework of internal ratings-based models and increase its comparability.

The report also contains sound practices relating to institutions’ intendent model validation functions, which the BCBS observed during the study. Report.

BCBS Finalizes Revised General Guide to Account Opening

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On February 4, the Basel Committee on Banking Supervision (“BCBS“) published a revised draft of its guidelines on “sound management of risks related to money laundering and financing of terrorism” which comprises the Guidelines issued in January 2014 and the addition of a new Annex IV – General Guide to Account Opening.

Annex IV is intended to focus on some of the mechanisms that banks can use in developing an effective consumer identification and verification programme and sets out the information that should be collected at the time of account opening. BCBS acknowledges that customer identification and verification policies and procedures will differ to reflect risks arising from the relevant categories of customers, products and services.

Annex IV is divided into two substantive sections: the first deals with what types of information should be collected and verified for natural persons seeking to open accounts; and the second describes what types of information should be collected and verified for legal persons and legal arrangements.  Guidelines.

EBA Opinion and Report on the Establishment of a European Framework for Qualifying Securitizations

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The European Banking Authority (EBA) has published an Opinion and Report on the establishment of a European framework for qualifying securitizations.

The Opinion contains five recommendations for establishing of a European framework for qualifying securitizations including a need to:

  • conduct a review of the entire regulatory framework for securitizations and other investment products;
  • create a framework for qualifying securitizations; and
  • establish criteria to define both qualifying term securitizations and qualifying asset-backed commercial paper (ABCP).

The Report proposes a more risk-sensitive approach to capital regulation for long-term securitization instruments, as well as for ABCP and illustrates how the capital charges set out in the recent revision of the Basel Committee on Banking Supervision 2014 securitization framework should be lowered to recognize the relatively lower risk of qualifying products, while at the same time maintaining restraints on regulatory capital.

Implementation of Non-Cleared Derivatives Margin Rules Deferred

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March 18, 2015 – The Basel Committee on Banking Supervision and IOSCO have extended the implementation date for the Non-Cleared Derivatives Margin Rules, originally scheduled to start from December 1, 2015. Firms will now have until September 1, 2016 to prepare for the imposition of stricter rules for trading over-the-counter derivatives.

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.

IOSCO Publishes Consultation Paper on Risk Mitigation Standards for Non-Centrally Cleared OTC Derivatives

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On September 17, the IOSCO published a consultation paper on risk mitigation standards for non-centrally cleared OTC derivatives (CR06/2014).

The standards have been developed in consultation with the Basel Committee on Banking Supervision and the Committee on Payments and Market Infrastructures and propose nine standards whose objectives are to increase financial stability, facilitate the management of counterparty credit and other risks and promote legal certainty.

Comments are invited before the closing of the consultation on October 17.  Consultation.