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
BaFin Consults on Revisions to Requirements for Implementing Bail-InRelated Articles
NGFS Updates Address Short-Term Climate Scenarios and Transition Plans
The Network for Greening the Financial System (NGFS) is exploring the development of short-term climate scenarios to complement its existing scenario framework of long-term climate scenarios.
ISSB Updates Address ESG Issues while IASB Consults on Impairments
The International Sustainability Standards Board (ISSB) is seeking feedback, until August 09, 2023, on the exposure draft that sets out the methodology proposed by ISSB to amend the Sustainability Accounting Standards Board (SASB) Standards' metrics
OSFI to Review Liquidity Adequacy Guidelines and Policy Architecture
The Office of the Superintendent of Financial Institutions (OSFI) is consulting, until June 21, 2023, on a review of the liquidity treatment provided in the Liquidity Adequacy Requirements (LAR) Guideline for wholesale funding sources with retail-like characteristics.
ESRB Publishes Report on Cryptos and DeFi; ECB Updates on Digital Euro
The European Systemic Risk Board (ESRB) published a report that outlines the systemic implications of crypto markets and proposes policy options to address the risks stemming from crypto-assets and decentralized finance or DeFi.
EU Agencies Issue Updates on DORA, ESAP, and Crowdfunding Regulation
The European Supervisory Authorities (ESAs) published a discussion paper on their joint advice to the European Commission (EC) on proposals to specify criteria for critical information and communication technology (ICT) third-party service providers
ESAs Propose ESG Disclosure on STS Securitization, Issue Other Updates
The Joint Committee of the three European Supervisory Authorities (ESAs) proposed to amend the Implementing Regulation 2016/1799 on the mapping of External Credit Assessment Institutions' (ECAIs) credit assessments.
UK Authorities Issue Updates, Finalize Policy on Model Risk Management
The Prudential Regulation Authority (PRA) finalized the model risk management principles for banks, the policy statement PS5/23 on risks from contingent leverage, and PS4/23 on moving senior managers regime forms from the PRA Rulebook.
APRA Revises Implementation Timeline for Operational Risk Standard
The Australian Prudential Regulation Authority (APRA) updated the implementation date of the new cross-industry prudential standard CPS 230 on operational risk management
BCBS Consults on Basel FAQs and Amendments, Issues Other Updates
The Basel Committee on Banking Supervision (BCBS) published a report assessing implementation of the global Basel standards on net stable funding ratio (NSFR) and large exposures (LEX) in South Africa
EBA Announces Multiple Regulatory and Reporting Updates in April 2023
The European Banking Authority (EBA) published consultations on the amendments to the guidelines on risk-based anti-money laundering and countering the financing of terrorism (AML/CFT) supervision
