April 11, 2019

ISDA published a statement that outlines challenges in implementation of the new Basel III market risk standard for banks in emerging markets. The statement highlights that there are uncertainties about how the rules will be transposed and whether all jurisdictions will meet the 2022 implementation target set by BCBS.

The statement mentions that the challenges posed by the implementation of the market risk standard for banks in emerging markets include barriers to entry, shortage of data, and concerns about the treatment of sovereign debt. While it is important for the framework to be implemented as consistently as possible, it is also imperative that regulators and market participants monitor and understand the impact on emerging market banks and economies. As per the statement, most jurisdictions in Asia Pacific, including China and India, have not yet set out any plan for the transposition and implementation of the fundamental review of trading book (FRTB) standard. However, Hong Kong appears to be aiming for compliance with the 2022 timeline set by BCBS, following indications from HKMA that it will publish a consultation on the FRTB in 2019. Singapore and Australia are also expected to follow the global timeline, but there has not yet been any public information from regulators. Furthermore, EU has proposed going live with a two-step approach, starting with reporting requirements and moving subsequently to binding capital requirements, which will form part of a separate legislative proposal.

 

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Keywords: International, Banking, Market Risk, FRTB, Capital Requirements, Basel III, Emerging Markets, BCBS, ISDA

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