General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
December 07, 2017

The oversight body of BCBS, which constitutes the Group of Central Bank Governors and Heads of Supervision (GHOS), has endorsed the outstanding Basel III post-crisis regulatory reforms. BCBS published the final standards text detailing the reforms and the its assessment of their quantitative impact. A short description of the agreed reforms was also published in the form of a summary document. The revised standards will take effect from January 01, 2022 and will be phased-in over five years.

The GHOS has endorsed the BCBS proposal to extend the implementation date of the revised minimum capital requirements for market risk, which were originally set to be implemented in 2019, to January 01, 2022 (which will constitute both the implementation and regulatory reporting date for the revised framework). Deferring implementation of the revised market risk framework will align its start date with that of the recently announced Basel III revisions for credit risk and operational risk. It will allow additional time for banks to develop the systems infrastructure needed to apply the framework and for BCBS to address certain issues related to the market risk framework. This includes a review of the calibrations of the standardized and internal model approaches to ensure consistency with the original expectations of BCBS. The reforms endorsed by the GHOS include the following elements:

  • Revised standardized approach for credit risk, which will improve the robustness and risk- sensitivity of the existing approach.
  • Revisions to the internal ratings-based approach for credit risk, where the use of the most advanced internally modeled approaches for low-default portfolios will be limited.
  • Revisions to the credit valuation adjustment (CVA) framework, including the removal of the internally modeled approach and the introduction of a revised standardized approach.
  • Revised standardized approach for operational risk, which will replace the existing standardized approaches and the advanced measurement approaches.
  • Revisions to the measurement of the leverage ratio and a leverage ratio buffer for global systemically important banks (G-SIBs), which will take the form of a tier 1 capital buffer set at 50% of a G-SIB's risk-weighted capital buffer.
  • An aggregate output floor, which will ensure that banks' risk-weighted assets (RWAs) generated by internal models are no lower than 72.5% of RWAs, as calculated by the Basel III framework's standardized approaches. Banks will also be required to disclose their RWAs based on these standardized approaches.

GHOS members also reaffirmed their expectation of full, timely, and consistent implementation of all elements of this package, including the minimum capital requirements for market risk. The standards agreed by GHOS constitute minimum standards, although jurisdictions may elect to adopt more conservative standards. Moreover, jurisdictions will be considered compliant with the Basel framework if they do not implement any of the internally modeled approaches and instead implement the standardized approaches. The Basel Committee has established a program to evaluate the post-crisis reforms and will actively participate in the efforts of FSB to evaluate the effects of reforms. Stefan Ingves, Chairman of the Basel Committee and Governor of Sveriges Riksbank, said: "Now that the Basel III regulatory reform agenda is complete, we must focus on the important task of ensuring the standards are implemented consistently around the world. The Committee, through its Regulatory Consistency Assessment Program, will therefore continue to monitor closely the implementation of the Basel III standards."

 

Related Links

 

Effective Date: January 01, 2022

Keywords: International, Banking, Final Basel III, Output Floor, QIS, BCBS

Related Insights
News

HKMA Announces Intention to Consult on Updated BCBS Disclosure Rules

HKMA announced that it will consult the industry in due course on the relevant implementation proposal to give effect to the disclosure requirements of the December 2018 package by BCBS.

December 17, 2018 WebPage Regulatory News
News

US Agencies Propose Derivative Counterparty Credit Exposure Framework

US Agencies (OCC, FED, and FDIC) proposed to implement a new approach for calculating the exposure amount of derivative contracts under the regulatory capital rule.

December 17, 2018 WebPage Regulatory News
News

HKMA Issues and Revises Reporting Forms Under the IRRBB Framework

HKMA issued a revised version of the Supervisory Policy Manual (SPM) IR-1, with an updated title “Interest Rate Risk in the Banking Book” (IRRBB).

December 14, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Second Update for December 2018

EBA published answers to six questions under the Single Rulebook question and answer (Q&A) updates for this week.

December 14, 2018 WebPage Regulatory News
News

OSFI Proposes Changes to Guideline on Large Exposure Limits

OSFI proposed revisions to the Guideline B-2 on Large Exposure Limits, for implementation in the first quarter of 2020.

December 13, 2018 WebPage Regulatory News
News

BCBS Consults on Disclosure Rules for Leverage Ratio Window-Dressing

BCBS published a consultative document on revisions to the leverage ratio disclosure requirements to address the leverage ratio window-dressing behavior.

December 13, 2018 WebPage Regulatory News
News

PRA Updates the Policy on Approach to Systemic Risk Buffer

PRA published the final Statement of Policy on the PRA approach to the implementation of the systemic risk buffer (SRB), as proposed in the consultation paper CP29/18.

December 13, 2018 WebPage Regulatory News
News

EP Report Examines Financial Supervision and Regulation in US

European Parliament published a report that provides a concise overview of the Dodd-Frank Act, the challenges of its implementation, and efforts to roll back the Act, in large part due to what are viewed to be vague and impractical provisions.

December 12, 2018 WebPage Regulatory News
News

FED Proposes to Revise Several Reporting Forms Including FR Y-9C

FED proposed to extend for three years, with revision, the FR Y-9, FR Y-7N, FR Y-11, and FR 2314 family of reports, in addition to the forms FR 2886b, FR Y-8, FR 2248, FR 2320, FR 2644, and FR 2886b.

December 12, 2018 WebPage Regulatory News
News

EBA Finalizes Guidelines on the STS Criteria in Securitization

EBA published the final guidelines that provide a harmonized interpretation of the criteria for a securitization to be eligible as simple, transparent, and standardized (STS) on a cross-sectoral basis throughout EU.

December 12, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2340