BCBS published a report presenting the results of a survey conducted on proportionality practices in bank regulation and supervision. The Basel Committee conducted this survey among its members and those of the Basel Consultative Group (BCG), in an effort to take stock of the proportionality measures in place across jurisdictions.
The following are the key findings of the survey:
- The majority of respondents to the survey apply proportionality measures in their jurisdictions. In most cases, such measures are applied to banks that represent a relatively small share of total banking assets in the relevant jurisdiction, although there is a fair degree of heterogeneity.
- Jurisdictions rely on a number of determinants in identifying proportionality thresholds/segments. These include a wide number of balance sheet metrics and differentiation by bank business models. In most cases, these indicators are coupled with supervisory judgment when determining the scope of banks subject to different requirements.
- Most jurisdictions apply some form of proportionality related to capital and liquidity requirements. These generally take the form of a modified/simpler version of the existing Basel standards, particularly for the more complex risk categories, or an exemption from such requirements for certain banks.
- Jurisdictions similarly apply proportionate reporting and disclosure requirements, with some banks subject to less onerous requirements and submission frequencies.
- Most jurisdictions also apply a proportionate approach to their supervisory practices, including the intensity of on- and off-site examinations, requirements related to risk management controls and governance, and supervisory stress tests.
The majority of the respondents indicated that they have future plans related to proportionality, while just under half of BCG respondents indicated likewise. These include plans to review the existing proportionality regimes, including the scope for developing simpler approaches for capital and liquidity requirements, reducing reporting and disclosure requirements, and reviewing the scope of banks subject to proportionality measures, and the associated threshold determinants. Some jurisdictions noted that they plan to apply a proportionate approach to supervision. A few jurisdictions that do not apply proportionality measures indicated that they plan to consider introducing a proportionality regime in the future.
Keywords: International, Banking, Basel III, Proportionality, Banking Supervision, Banking Regulation, BCBS
Previous ArticleAPRA Amends Prudential Standards in Line with CPS 320 and GPS 340
FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.
MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.
FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.