BCB Issues Updates on FRTB, Governance, and Liquidity Rules
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
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
