March 12, 2019

Sabine Lautenschläger, Member of the Executive Board of ECB and Vice-Chair of the Supervisory Board of ECB, spoke at the at the 20th anniversary conference of FSI. She emphasized the need find the right balance between risk-sensitivity and simplicity of Basel III rules and spoke in favor of having a risk-sensitive capital framework, although restricted by important backstops. She also outlined certain remaining issues that should be dealt with or discussed at BCBS, some of which she mentioned are already part of the 2019 work program of BCBS.

Ms. Lautenschläger believes that "the basic architecture of Basel III is solid and that it will serve us well for years to come." She agreed with the idea of not coming up with a new framework every three years and instead focusing on implementation while also emphasizing that she does not want to give the impression that she is in favor of less regulation. With respect to the issues to be dealt with at the BCBS, she mentioned that work can be done to improve joint understanding of emerging risks in the banking sector, to exchange information on standards and best practices on new or increasingly relevant topics, and on a minimum convergence of supervisory practices. She also mentioned the following: 

  • First and foremost, BCBS should monitor how the new Basel rules are implemented in national laws and ensure it has a thorough overview of how these are then translated into supervisory practices.
  • The Basel Committee should also foster an intensive exchange of information about the current and emerging risks and vulnerabilities. These discussions should also cover the approaches supervisors could use to analyze, assess, and react to these upcoming risks via Pillar 2 or other instruments. 
  • BCBS could and should be a hub for exchanging supervisory knowledge, tools, and approaches regarding cyber risk.
  • BCBS could be of great help for supervisors regarding operational, legal, and reputational risks in banks, which are linked to conduct risks or anti-money laundering. The same is true for green finance or climate-related risk. Here, too, a structured exchange of information about different tools and methods would help to strengthen supervision globally.

 

Related Link: Speech

 

Keywords: International, Europe, EU, Banking, Basel III, Pillar 2, Cyber Risk, Operational Risk, Climate Related Risk, ECB, BCBS, BIS

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