BCBS has set out the strategic work priorities, as part of its the work program for 2021-22. Going forward, the Basel III-related work will focus on monitoring the full, timely, and consistent implementation of standards by the Basel Committee members and completing an evidence-based evaluation of the effectiveness of these Basel reforms. Other strategic priorities involve ensuring recovery and resilience post COVID-19, addressing technology and climate-related risks, and increasing supervisory cooperation in the areas of technology, operational resilience, and data governance.
The work program, which was recently endorsed by GHOS, is focused on the following three key themes:
- Resilience and recovery from COVID-19 crisis. Work in this area includes monitoring and assessing risks and vulnerabilities to the global banking system, drawing on supervisory insights, and conducting thematic assessments. Where deemed relevant, BCBS stands ready to deploy additional policy and/or supervisory measures to mitigate these risks. BCBS will monitor the implementation and unwinding of domestic measures taken by members during the pandemic, with a view to a consistent implementation of the Basel III framework. In parallel, BCBS is conducting an evaluation of the initial lessons learned from COVID-19 with regard to the Basel III standards. An interim report on this analysis will be finalized by the Summer of 2021 and will be followed by subsequent updates. The findings of BCBS will also form part of the interim and final reports of FSB to the G20 leaders.
- Mitigation of medium-term risks and trends. BCBS will pursue a forward-looking approach to identifying, assessing, and mitigating medium-term risks and structural trends to the banking system. This includes work related to the ongoing digitalization of finance, climate-related financial risks, and the impact of a low-for-long interest rate environment on business models of banks. BCBS will also finalize outstanding initiatives related to mitigating risks and structural trends, such as the prudential treatment of banks' crypto-assets exposures and banks' disclosure requirements for market risk and sovereign exposures.
- Strengthening of supervisory coordination and practices. BCBS will pursue a range of initiatives aimed at strengthening supervisory coordination and practices. The use of artificial intelligence/machine learning in banking and supervision, along with broader issues related to the use of technology in supervision (suptech) is on the agenda. Focus areas will also include leveraged lending and collateralized loan obligations, data and technology governance by banks, and insights and supervisory approaches on operational resilience, with a focus on cyber security. BCBS will continue to cooperate with other global standard-setting bodies and international fora on cross-sectoral supervisory issues, including cross-border payments, nonbank financial intermediation, benchmark rate transition and foreign-exchange settlement risk. BCBS will pursue further initiatives to promote the role of proportionality in bank regulation and supervision, including publishing the results of a survey on current and prospective plans for proportionality for 90 jurisdictions, conducted jointly with the World Bank. Building on this stocktake, BCBS plans to develop practical guidance on the use and design of a proportionate regulatory and supervisory framework, for voluntary use by jurisdictions.
Keywords: International, Banking, Work Program, COVID-19, Climate Change Risk, Market Risk, Operational Resilience, Suptech, Cyber Risk, Data Governance, Basel, Disclosures, BCBS
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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