March 19, 2019

BCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision. The Basel Committee conducted this survey among its members and those of the Basel Consultative Group (BCG), in an effort to take stock of the proportionality measures in place across jurisdictions.

The following are the key findings of the survey:

  • The majority of respondents to the survey apply proportionality measures in their jurisdictions. In most cases, such measures are applied to banks that represent a relatively small share of total banking assets in the relevant jurisdiction, although there is a fair degree of heterogeneity.
  • Jurisdictions rely on a number of determinants in identifying proportionality thresholds/segments. These include a wide number of balance sheet metrics and differentiation by bank business models. In most cases, these indicators are coupled with supervisory judgment when determining the scope of banks subject to different requirements.
  • Most jurisdictions apply some form of proportionality related to capital and liquidity requirements. These generally take the form of a modified/simpler version of the existing Basel standards, particularly for the more complex risk categories, or an exemption from such requirements for certain banks.
  • Jurisdictions similarly apply proportionate reporting and disclosure requirements, with some banks subject to less onerous requirements and submission frequencies.
  • Most jurisdictions also apply a proportionate approach to their supervisory practices, including the intensity of on- and off-site examinations, requirements related to risk management controls and governance, and supervisory stress tests.

The majority of the respondents indicated that they have future plans related to proportionality, while just under half of BCG respondents indicated likewise. These include plans to review the existing proportionality regimes, including the scope for developing simpler approaches for capital and liquidity requirements, reducing reporting and disclosure requirements, and reviewing the scope of banks subject to proportionality measures, and the associated threshold determinants. Some jurisdictions noted that they plan to apply a proportionate approach to supervision. A few jurisdictions that do not apply proportionality measures indicated that they plan to consider introducing a proportionality regime in the future.

 

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Keywords: International, Banking, Basel III, Proportionality, Banking Supervision, Banking Regulation, BCBS