BCBS Chairman Speaks on Implementation and Effectiveness of Basel III
The BCBS Chairman Stefan Ingves spoke about implementation of Basel III during his keynote address at the Institute for Law and Finance conference in Frankfurt. He highlighted that "finalizing Basel III was an important milestone." However, work remains to implement Basel III nationally in a full, timely, and consistent manner; evaluate its effectiveness in reducing the excessive variability of risk-weighted assets (RWAs); and continue to monitor and assess the emerging risks. To this end, BCBS will continue to exercise its mandate to strengthen the regulation, supervision, and practices of banks worldwide.
He summarized the Basel III reforms from 2010 to 2017, also elaborating on the challenges faced during this process and the goals of these reforms. He then elaborated on the goal to reduce RWA variability and the ways to assess whether this goal has been accomplished. To that end, the Committee has initiated a rigorous evaluation of its post-crisis reforms, said Mr. Ingves. "As the reforms will only start to be implemented from 2022 onward, this exercise will take several years. But I believe that the Committee should remain open to the possibility of considering whether additional measures, or revisions to existing measures, are warranted to reduce excessive RWA variability." He said: "I will not prejudge the outcomes of these evaluations, but let me make three observations. First, the purpose of these evaluations is not to reopen already agreed standards. Second, the Basel Committee is a member-led and consensus-based body. Accordingly, the Basel III reforms are a compromise that reflects the different views of its members. Third, as the Basel reforms are minimum standards, jurisdictions are welcome to apply more conservative requirements should they wish to do so. This could include faster transitional arrangements and/or more conservative steady-state requirements."
With regard to the emerging risks, the Committee is reviewing its existing cyber-risk measures and will consider whether additional measures are needed to enhance operational resilience of banks, said Mr. Ingves. He emphasized that the Committee's response to the global financial crisis included much more than just regulation; it also encompassed a range of measures to support strong supervision. These include principles and guidance on corporate governance, risk data aggregation, the prudential treatment of assets, the treatment of weak banks, and an updated set of core principles for effective banking supervision. In future, the Committee also plans to step up its efforts to promote improvements in banking supervision practices and principles.
Related Link: Speech
Keywords: International, Banking, Basel III, Risk Weighted Assets, Cyber Risk, Banking Supervision, BCBS
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