The Basel Committee on Banking Supervision (BCBS) published high-level considerations on proportionality. The considerations are intended to provide practical support to supervisory authorities that seek to implement proportionality in their domestic regulatory and supervisory frameworks, in a way that does not undermine the stability or safety of financial institutions.
The document includes high-level considerations to guide decision-making and technical annexes outlining more specific considerations for various elements of the Basel framework. The Basel Consultative Group (BCG) developed these high-level considerations, the application of which will be voluntary and does not modify the core principles for effective banking supervision (BCPs), Basel framework, or any of the Committee's existing standards, guidelines, or sound practices. The Basel Committee does not intend to use these considerations or the accompanying technical annexes to assess proportionality in member or non-member jurisdictions and under the Regulatory Consistency Assessment Program (RCAP). Proportionality in financial system regulation and supervision can ensure that the applicable rules and supervision practices are consistent with the systemic importance and risk profile of banks and are appropriate for the broader characteristics of a particular financial system. To implement proportionality approach across and within jurisdictions, the authorities should consider the following high-level considerations:
- Proportionality approaches should be consistent with the core principles for effective banking supervision to preserve financial stability.
- Basel framework is the standard for internationally active banks and it already embeds a menu of options with various elements of proportionality and flexibility that could be the first choice whenever appropriate and possible.
- The regulation for non-internationally active banks should be customized depending on local circumstances.
- Effective proportionate approaches should be both conservative and simple to understand and implement.
- Proportionality should help authorities achieve an appropriate intensity of supervision for all banks.
- Proportionate approaches should provide regulatory certainty, without being overly static.
- Proportionality approaches should include supervisory discretion that will allow supervisors to respond to bank behaviors and financial system developments.
Keywords: International, Banking, Basel, Proportionality, Systemic Risk, Financial Stability, Basel Core Principles, Basel Consultative Group, BCBS
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
The three European Supervisory Authorities (ESAs) issued a letter to inform about delay in the Sustainable Finance Disclosure Regulation (SFDR) mandate, along with a Call for Evidence on greenwashing practices.
The International Sustainability Standards Board (ISSB) of the IFRS Foundations made several announcements at COP27 and with respect to its work on the sustainability standards.
The International Organization for Securities Commissions (IOSCO), at COP27, outlined the regulatory priorities for sustainability disclosures, mitigation of greenwashing, and promotion of integrity in carbon markets.
The European Banking Authority (EBA) issued a statement in the context of COP27, clarified the operationalization of intermediate EU parent undertakings (IPUs) of third-country groups
The Office of the Superintendent of Financial Institutions (OSFI) published an annual report on its activities, a report on forward-looking work.
The Australian Prudential Regulation Authority (APRA) finalized amendments to the capital framework, announced a review of the prudential framework for groups.
The Bank for International Settlements (BIS) Innovation Hubs and several central banks are working together on various central bank digital currency (CBDC) pilots.
The European Central Bank (ECB) published the results of its thematic review, which shows that banks are still far from adequately managing climate and environmental risks.
Among its recent publications, the European Banking Authority (EBA) published the final standards and guidelines on interest rate risk arising from non-trading book activities (IRRBB)
The European Commission (EC) recently adopted regulations with respect to the calculation of own funds requirements for market risk, the prudential treatment of global systemically important institutions (G-SIIs)