BCBS Discusses Policy and Supervisory Issues at October Meeting

At the meeting, BCBS agreed to take the following steps: 

• Consult on a final set of limited and targeted adjustments to the credit valuation adjustment risk framework. The paper will be published in November. Members reaffirmed their expectation to implement the framework alongside the accompanying Basel III standards on January 01, 2022.
• Consult on a set of revised disclosure requirements related to the market risk framework finalized in January 2019 and to consult on disclosure templates for sovereign exposures of banks, which would be voluntary to implement. These papers will be published next month.
• Publish a discussion paper on the prudential treatment of crypto-assets. BCBS reiterated its view that the prudential treatment of banks' cryptoasset exposures should appropriately reflect the high degree of risk of cryptoassets. In light of ongoing initiatives in crypto-asset markets, BCBS will seek the views of stakeholders on a wide range of issues related to the prudential treatment of crypto-assets.
• Review reports that assessed the implementation of NSFR and large exposures standards in Argentina and China. Publication of these reports is expected in November.
• Publish a report on open banking and application programming interfaces next month. 
• Consult on guidelines to enhance cooperation between prudential regulatory authorities and authorities in charge of anti-money laundering and combating the financing of terrorism. These proposed guidelines will be published next month.

Going forward, BCBS will conduct a set of deep-dive assessments on the risk management challenges associated with use of artificial intelligence and machine learning in financial services banks, dependencies on unregulated third parties and the implications for outsourcing supervisory regimes, and supervisory challenges related to data governance and management, data security, portability, and recovery. BCBS also took stock of benchmark rate reforms and discussed their potential regulatory and supervisory implications, stemming from the transition of banks to alternative reference rates. BCBS places high priority on this issue and expects all banks to be adequately prepared to meet the transition timeline. BCBS will consider whether any further regulatory or supervisory measures are warranted to help achieve this outcome.

As part of the ongoing work program on evaluating and monitoring the impact of its post-crisis reforms, BCBS also discussed the usability of capital buffers and published a newsletter to reiterate the importance of the capital buffer framework and emphasize that buffers are designed to be usable. At the meeting, BCBS discussed additional supervisory initiatives, including the implementation of its guidance for managing risks associated with the settlement of foreign-exchange transactions and the need for further measures to mitigate such risks. The Committee also exchanged views on work on the climate-related financial risks and the audit of expected credit loss accounting.

Related Links

• Press Release on BCBS Meeting
• Press Release on ICBS
• Newsletter on Capital Buffers

Keywords: International, Banking, Post-Crisis Reforms, Market Risk, NSFR, Large Exposures, Fintech, ICBS, Capital Buffer, Basel III, CVA Risk, BCBS