BCBS Chairman Speaks on Implementation and Effectiveness of Basel III
The BCBS Chairman Stefan Ingves spoke about implementation of Basel III during his keynote address at the Institute for Law and Finance conference in Frankfurt. He highlighted that "finalizing Basel III was an important milestone." However, work remains to implement Basel III nationally in a full, timely, and consistent manner; evaluate its effectiveness in reducing the excessive variability of risk-weighted assets (RWAs); and continue to monitor and assess the emerging risks. To this end, BCBS will continue to exercise its mandate to strengthen the regulation, supervision, and practices of banks worldwide.
He summarized the Basel III reforms from 2010 to 2017, also elaborating on the challenges faced during this process and the goals of these reforms. He then elaborated on the goal to reduce RWA variability and the ways to assess whether this goal has been accomplished. To that end, the Committee has initiated a rigorous evaluation of its post-crisis reforms, said Mr. Ingves. "As the reforms will only start to be implemented from 2022 onward, this exercise will take several years. But I believe that the Committee should remain open to the possibility of considering whether additional measures, or revisions to existing measures, are warranted to reduce excessive RWA variability." He said: "I will not prejudge the outcomes of these evaluations, but let me make three observations. First, the purpose of these evaluations is not to reopen already agreed standards. Second, the Basel Committee is a member-led and consensus-based body. Accordingly, the Basel III reforms are a compromise that reflects the different views of its members. Third, as the Basel reforms are minimum standards, jurisdictions are welcome to apply more conservative requirements should they wish to do so. This could include faster transitional arrangements and/or more conservative steady-state requirements."
With regard to the emerging risks, the Committee is reviewing its existing cyber-risk measures and will consider whether additional measures are needed to enhance operational resilience of banks, said Mr. Ingves. He emphasized that the Committee's response to the global financial crisis included much more than just regulation; it also encompassed a range of measures to support strong supervision. These include principles and guidance on corporate governance, risk data aggregation, the prudential treatment of assets, the treatment of weak banks, and an updated set of core principles for effective banking supervision. In future, the Committee also plans to step up its efforts to promote improvements in banking supervision practices and principles.
Related Link: Speech
Keywords: International, Banking, Basel III, Risk Weighted Assets, Cyber Risk, Banking Supervision, BCBS
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
Related Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards