BCBS Publishes High-level Considerations on Proportionality
The Basel Committee on Banking Supervision (BCBS) published high-level considerations on proportionality. The considerations are intended to provide practical support to supervisory authorities that seek to implement proportionality in their domestic regulatory and supervisory frameworks, in a way that does not undermine the stability or safety of financial institutions.
The document includes high-level considerations to guide decision-making and technical annexes outlining more specific considerations for various elements of the Basel framework. The Basel Consultative Group (BCG) developed these high-level considerations, the application of which will be voluntary and does not modify the core principles for effective banking supervision (BCPs), Basel framework, or any of the Committee's existing standards, guidelines, or sound practices. The Basel Committee does not intend to use these considerations or the accompanying technical annexes to assess proportionality in member or non-member jurisdictions and under the Regulatory Consistency Assessment Program (RCAP). Proportionality in financial system regulation and supervision can ensure that the applicable rules and supervision practices are consistent with the systemic importance and risk profile of banks and are appropriate for the broader characteristics of a particular financial system. To implement proportionality approach across and within jurisdictions, the authorities should consider the following high-level considerations:
- Proportionality approaches should be consistent with the core principles for effective banking supervision to preserve financial stability.
- Basel framework is the standard for internationally active banks and it already embeds a menu of options with various elements of proportionality and flexibility that could be the first choice whenever appropriate and possible.
- The regulation for non-internationally active banks should be customized depending on local circumstances.
- Effective proportionate approaches should be both conservative and simple to understand and implement.
- Proportionality should help authorities achieve an appropriate intensity of supervision for all banks.
- Proportionate approaches should provide regulatory certainty, without being overly static.
- Proportionality approaches should include supervisory discretion that will allow supervisors to respond to bank behaviors and financial system developments.
Related Links
Keywords: International, Banking, Basel, Proportionality, Systemic Risk, Financial Stability, Basel Core Principles, Basel Consultative Group, BCBS
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Blake Coules
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
IOSCO Sets Out Crypto-Asset Roadmap for 2022-23Related Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
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.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
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.
