BCB Proposes Changes to Credit and Market Risk Rules Under Basel III
BCB published two consultation papers setting out certain credit risk and market risk requirements under the Basel III framework. One consultation proposes a resolution that amends the procedures for calculation of capital requirements for the standardized approach to credit risk exposures. The consultation period ends on February 23, 2021 and the associated final BCB resolution is expected to take effect on January 01, 2022. The other consultation relates to changes to certain aspects of the regulatory framework for market risk, based on the Fundamental Review of the Trading Book (FRTB) under Basel III. The consultation period for this proposal ends on February 09, 2021 and the associated regulatory changes are expected to come into force on January 01, 2022.
The new framework for the standardized approach for credit risk is expected to be more robust and risk-sensitive. The proposal increases the granularity of the weights applicable to exposures, bringing refinements in the differentiation in credit risk. The consultation introduces BCBS recommendations related to the Basel III framework, as published in December 2017. The proposal is addressed to financial institutions classified in Segments 1 (S1) to 4 (S4). All institutions included in these segments currently opt for the standardized approach for credit risk. This new resolution will replace the BCB Circular No. 3,644 dated March 04, 2013, upon finalization.
Additionally, the consultation on market risk framework represents the first phase—out of the four expected phases—of the process of reviewing the prudential standard for determining the capital requirements related to market risk. The first phase consultation covers requirements for the risk management process, including improvements in governance and the identification of financial instruments classified in the trading portfolio. According to the proposals in the consultation, the requirements in the first phase will come into force on January 01, 2022, through amendments to the Resolution 4,557 of February 23, 2017 and through the publication of a new rule that will replace the Circular No. 3,354 dated June 27, 2007.
Related Links (in Portuguese)
- Press Release
- Consultation on Credit Risk (PDF)
- First Phase Consultation on Market Risk (PDF)
- Consultations Page
Comment Due Date: February 23, 2021/February 09, 2021
Keywords: Americas, Brazil, Banking, Basel, Credit Risk, Market Risk, Standardized Approach, FRTB, Regulatory Capital, Financial Instruments, Trading Book, BCB
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
OSFI Updates Guidance on Dividend Distributions Amid CrisisRelated Articles
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.