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.
Keywords: International, Banking, Basel III, Proportionality, Banking Supervision, Banking Regulation, BCBS
Previous ArticleIFRS Foundation Updates the IFRS Taxonomy Guide for Preparers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.
The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.
The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).
The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.