Featured Product

    Andreas Dombret of Bundesbank Spoke on Basel III Compromise and Beyond

    November 16, 2017

    Andreas Dombret of Deutsche Bundesbank spoke at the Bundesbank reception as part of the Euro Finance Week 2017 in Frankfurt. He discussed the recent compromises reached on Basel III, also reflecting on the finalization of Basel III regulations, the future challenges to be faced, and the ways to ease the burden on banks.

    With regard to the Basel III compromises, he  highlighted that a successful outcome was achieved at two points in the negotiations. The first was last November, with what is known as the Santiago compromise. As a result of this compromise, the strict German methods for calculating real estate risks are now recognized as risk-reducing while the degrees of freedom for those calculating risk with internal models have been preserved to a considerable extent. "Compared with what was originally proposed, the capital increase for German banks has been halved—this was achieved through a tough negotiation stance on our part." The second, ongoing round of negotiations concerns the calibration of the output floor—the threshold below which calculations of capital requirements using internal models are not allowed to fall. However, he agreed that this standard will help to put banks' capital base on a sound and sustainable footing, thus helping to restore further confidence in the banking sector.

    Mr. Dombret also examined the effects of regulations that msut be cushioned. He believes that the regulatory capital and liquidity requirements constitute one of many challenges that face German banks and savings banks. Other important topics are in connection with the changeover to International Financial Reporting Standard (IFRS) 9 and the increase in loss-absorbing capital. He suggested on transitioning to the new requirements gradually, to avoid overburdening the credit institutions in the short term. Supervisors must generally look for ways to ease the burden on banks and savings banks, without neglecting the goal. Therefore, he recommended further strengthening of the principle of proportionality in regulation to relieve small and medium-size institutions. He also recommending that the targeted review of internal models (TRIM) project, under the Single Supervisory Mechanism, should be conducted in a responsible and considered manner.

    He said, "I am convinced that the current projects should be followed by a sort of regulatory break ... ." Even if regulators take a break, banks and savings banks need to continue implementing the decisions taken. He also added that supervisors ought to utilize this time to thoroughly review the impact of the reforms, with the aim of correcting the identified gaps, duplication of work or error. He mentioned that the potential challenges and opportunities are immense and explained: "The banking sector is already compelled to proactively address structural change. Now Brexit has come along, too. I see this as the greatest medium-term challenge facing the European economy and thus, not least, the financial sector as well." He then reiterated that, following the severe financial crisis, a new architecture has been successfully created for a resilient and high-performance financial system.

     

    Related Link: Speech (PDF)

    Keywords: International, Europe, Germany, Banking, Basel III, IFRS 9, Capital Floor, TRIM, Bundesbank, BIS

    Featured Experts
    Related Articles
    News

    SEC Finalizes Capital and Margin Requirements for Security-Based Swaps

    SEC adopted a package of rules and rule amendments to establish capital, margin, and segregation requirements for security-based swaps, under Title VII of the Dodd-Frank Act.

    August 22, 2019 WebPage Regulatory News
    News

    ECB Revises Prudential Provisioning Expectations for New NPEs

    ECB is revising its supervisory expectations for prudential provisioning of new non-performing exposures (NPEs) specified in the “Addendum to the ECB Guidance to banks on non-performing loans” (Addendum)

    August 22, 2019 WebPage Regulatory News
    News

    CFTC Proposes to Revise Information Collection on Margin Requirements

    CFTC is requesting comments on the burdens associated with certain aspects of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (final rule).

    August 21, 2019 WebPage Regulatory News
    News

    FASB to Delay Effective Date for Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply the standard that addresses this area of financial reporting.

    August 21, 2019 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.9

    EBA published phase 2 of its technical package on the reporting framework 2.9, which includes validation rules, Data Point Model (DPM) data dictionary, and XBRL taxonomies.

    August 21, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Its Consultation Related to SME Financing

    FSB published responses received to the consultation on a report on the evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing.

    August 21, 2019 WebPage Regulatory News
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    EBA and ESMA Issue Joint Response to EC Letter on Crypto-Assets

    EBA and ESMA issued a joint response to the EC letter, from July 19, 2019, on crypto-assets.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3681