The Basel Committee on Banking Supervision (BCBS) launched consultation on a Pillar 3 disclosure framework for climate-related financial risks, with the comment period ending on February 29, 2024. BCBS is also seeking comments, until March 28, 2024, on targeted adjustments to the interest rate risk in the banking book (IRRBB) standard and on the crypto-asset exposures of banks. Additionally, BCBS recently published reports assessing the implementation of the net stable funding ratio (NSFR) and large exposures framework in Mexico and Switzerland.
The consultation on Pillar 3 disclosure of climate-related financial risks forms part of the holistic approach of BCBS to address climate-related financial risks to the global banking system. This preliminary proposal for qualitative and quantitative bank-specific Pillar 3 disclosure requirements would complement the International Sustainability Standards Board (ISSB) framework and provide a common disclosure baseline for internationally active banks. Based on feedback through the consultation process, BCBS will consider which elements would be mandatory and which subject to national discretion. The Basel Committee will consider all feedback received through the consultation, with a view to publishing a revised or final proposal in the second half of 2024. BCBS would welcome views on the feasibility of a potential implementation date of January 01, 2026, one year after the effective date proposed by the ISSB and after the expiration of the ISSB’s proposed transitional arrangements. In addition, BCBS would welcome views on whether any transitional arrangements would be required and, if so, the rationale and duration for such transition.
The key highlights of other recent updates follow:
- As part of the consultation on adjustments to the IRRBB standard, BCBS proposes to make a set of adjustments to the calibration of the specified interest rate shocks in the IRRBB standard. It also proposes to make targeted adjustments to the current methodology used to calculate the shocks. The changes to the methodology are needed to address problems with how the current methodology captures interest rate changes during periods when interest rates are close to zero.
- The targeted adjustments to the crypto-assets standard for banks involve tightening of the criteria for stablecoins to receive a preferential regulatory treatment. Under the proposals banks would also be required to perform due diligence to ensure that they have an adequate understanding of the stabilization mechanisms of stablecoins to which they are exposed and how effective they are. As part of this due diligence, banks would be required to conduct statistical or other tests demonstrating that the stablecoin maintains a stable relationship in comparison to the reference asset.
- With respect to the assessment reports on NSFR and large exposures standards, Mexico was found to be Compliant with both these standards while Switzerland was found to be Largely Compliant with these global standards set by the Basel Committee. In addition, a follow-up assessment found Mexico to be Largely Compliant with the Liquidity Coverage Ratio (LCR) standard.
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- Consultation Climate Risk Disclosures
- Consultation on IRRBB Standard
- Consultation on Crypto-Asset Exposures
- Reports on NSFR and Large Exposures
Keywords: International, Mexico, Switzerland, Banking, Basel, ESG, Climate Change Risk, Crypto Assets, Reporting, NSFR, Large Exposures, RCAP, LCR, Stablecoins, IRRBB, Pillar 3, Disclosures, BCBS
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