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; it is also seeking comments, until May 15, 2023, on various technical amendments and answers to the frequently asked questions (FAQs) related to the implementation of Basel framework. Additionally, the Bank for International Settlements (BIS) Innovation Hub and the Reserve Bank of India (RBI) jointly launched the fourth G20 TechSprint hackathon for global innovators. Moreover, the BIS Innovation Hub issued a note summarizing policy perspectives with respect to the central bank digital currencies (CBDCs).
The reports on implementation of NSFR and large exposures framework. These reports, which form part of the Regulatory Consistency Assessment Program (RCAP), found the respective South African regulations to be largely compliant and compliant with the NSFR standard and large exposures framework, respectively. As of January 31, 2023, the NSFR regulations in South Africa have been assessed as largely compliant with the Basel NSFR standard. This is one notch below the highest grade. Three out of the four components of the Basel NSFR standard have been assessed as compliant for the criteria of scope, minimum requirements and application issues, required stable funding, and disclosure requirements while the available stable funding component has been assessed as largely compliant. The Basel Committee Assessment Team identified one-material deviation which is being rectified by the Prudential Authority and full compliance is expected to be reached by January 01, 2028. Meanwhile, the large exposures regulations in South Africa have been assessed as compliant with the Basel large exposures framework. All three components have been assessed as compliant and these components are the scope and definitions, minimum requirements and transitional arrangements, and the value of exposures. The Basel Committee Assessment Team identified one non-material deviation relating to the scope and definitions and some observations relating to each of the components of the framework. The jurisdictional assessments of the implementation of the Basel Committee's NSFR and LEX global standards, started in 2018, remain suspended following the outbreak of COVID-19.
Consultation on technical amendments. BCBS published proposals for technical amendments and answers to frequently asked questions (FAQs) to help promote consistent interpretation of the Basel framework. The set of interpretative issues addressed relates to the standardized approach to operational risk, the disclosure standards for credit valuation adjustment (CVA) risk, the description of the calculation of indicator scores for global systemically important banks (G-SIBs), terminology used in the countercyclical capital buffer (CCyB), and the application of the liquidity standards to certain products. BCBS also finalized a set of FAQs that have been added to the Basel framework and are set out in the annex for information.
G20 TechSprint. The BIS Innovation Hub and the Reserve Bank of India launched the fourth edition of G20 TechSprint Initiative, a global technology competition to promote innovative solutions aimed at improving cross-border payments, under India's G20 presidency. The 2023 TechSprint is open to developers worldwide and is expected to conclude in the third quarter of 2023. The 2023 TechSprint will focus on three problem statements on cross-border payments:
- Technology solutions to reduce illicit finance risk around anti-money laundering, countering the financing of terrorism and sanctions.
- Foreign exchange and liquidity technology solutions to enable settlement in emerging market and developing economy currencies.
- Technology solutions for multilateral cross-border central bank digital currency platforms.
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Keywords: International, South Africa, Banking, Basel, NSFR, Large Exposures, RCAP, FAQs, Operational Risk, CVA Risk, G-SIBs, CCyB, Regulatory Capital, Liquidity Risk, G20 Techsprint, Cross-Border Payments, AML CFT, CBDC, BIS Innovation Hub, RBI, BCBS
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