The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system. The GHOS members agreed to mark, with the present agreement on the Basel III framework, a clear end to the post-crisis Basel III policy agenda. Any further potential adjustments to Basel III will be limited in nature and consistent with the evaluation work of BCBS. Going forward, the Basel III-related work of BCBS will focus on monitoring the implementation, timeliness, and consistency of Basel standards through the Regulatory Consistency Assessment Program as well as completing an evidence-based evaluation of the effectiveness of these reforms, also taking into consideration the lessons learned from the COVID-19 crisis.
The GHOS also endorsed a series of recommendations from the Basel Committee to focus its policy and supervisory agenda on future risks to the global banking system and its vulnerabilities. The recommendations followed a strategic review conducted by the Committee over the past year. The future work of the Basel Committee will focus on new and emerging topics, including structural trends in the banking sector, the ongoing digitalization of finance, and climate-related financial risk. Against the backdrop of the evolving risks and vulnerabilities in light of the ongoing COVID-19 crisis, GHOS members tasked the Basel Committee with continuing to pursue a coordinated approach in responding to the crisis, to preserve a global level playing field, and to avoid regulatory fragmentation. The approach comprises the following elements:
- Ongoing monitoring and assessment of vulnerabilities and risks to the global banking system from COVID-19, along with information-sharing of supervisory insights during the crisis
- Encouraging the use of flexibility embedded in the Basel framework, where relevant
- Monitoring the implementation of temporary adjustments to mitigate current risks to the banking system, to ensure they are consistent with the objectives of the Basel framework and are unwound in a timely manner
- Adopting additional global measures in a coordinated manner, where necessary and prudent
The oversight body of BCBS noted that using capital and liquidity resources to help banks to absorb shock during the ongoing COVID-19 crisis "should take priority at present." GHOS members strongly support the repeated guidance from the Basel Committee that a measured drawdown of these buffers is appropriate in the current period of stress and until the COVID-19 crisis is over. After the crisis, supervisors will provide banks with sufficient time to rebuild their buffers, taking account of economic, market, and bank-specific conditions.
Related Link: Press Release
Keywords: International, Banking, COVID-19, GHOS, RCAP, Basel, Regulatory Framework, Liquidity Risk, Climate Change Risk, Regtech, BCBS
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.