The Central Bank of Brazil (BCB) is consulting on changes related to certain aspects of the regulatory framework for market risk, based on the Fundamental Review of the Trading Book (FRTB) under Basel III. The consultation represents the second phase—out of the four expected phases—of the process of reviewing the prudential standard for determining the capital requirements related to market risk. The consultation period for this proposal ends on September 06, 2021 and these second-phase requirements have been proposed to come into force on July 01, 2022.
In addition, BCB published Resolution No. 111 that sets out the criteria for classifying instruments in the trading book or banking book, the governance requirements related to the trading desks in which instruments subject to market risk are managed, and the requirements for the recognition of internal transfers of risk in the determination of the minimum requirements. This resolution enters into force on March 01, 2022. Also published was Resolution No. 112, which establishes new regulation on the Governance, Risks, and Controls Committee (GRC). The GRC has the objective of defining guidelines and strategies related to corporate governance, strategic and risk management, and internal controls as well as adopting measures to systematize practices in these areas within the scope of BCB. This resolution enters into force on the date of its publication.
Finally, BCB established the Financial Liquidity Facilities in national currency (LFL) to enhance its role as lender of last resort. To be permanently available to financial institutions, the Financial Liquidity Facilities in the form of a loan against a collateral basket will start their operations on November 08, 2021 and become fully operational from November 16, 2021. The Financial Liquidity Facilities include Immediate Liquidity Facility and Term Liquidity Facility. Immediate Liquidity Facility is a very short-term standing facility (up to 5 business days). With the objective of meeting liquidity needs arising from mismatches between the assets and liabilities of financial institutions, the provision of the Term Liquidity Facility—with a maximum term of 359 calendar days— is a discretionary facility, by request of the financial institution. The Term Liquidity Facility may also be offered at the initiative of the BCB—in case of market dysfunction—by which pre-authorized financial amounts will be available for financial institutions, without the need for an individual authorization.
Related links (in Portuguese)
- Press Release on Consultation
- Consultation Document (PDF)
- Resolution No. 111
- Resolution No. 112
- Press Release on Financial Liquidity Facilities (in English)
- Resolution on Financial Liquidity Facilities
Comment Due Date: September 06, 2021
Effective Date: July 01, 2022 (Market Risk Rules)/March 01, 2022 (Resolution No. 111)/July 06, 2021 (Resolution No. 112)
Keywords: Americas, Brazil, Banking, Basel, Market Risk, Regulatory Capital, FRTB, Trading Book, Governance, Liquidity Risk, Liquidity Facility, BCB
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.
The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.
The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)
The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).
The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications