BCBS to Finalize Prudential Treatment of Crypto-Assets by Year-End

At the May meeting, the Basel Committee:

• agreed to a finalized set of principles for the effective management and supervision of climate-related financial risks, following a consultation on these principles last year. The principles will be published in the coming weeks. The publication of these principles forms part of the Committee's broader assessment of potential measures—spanning disclosure, supervisory and regulatory measures—to address climate-related financial risks to the global banking system. The Committee plans to provide an update on its work across these dimensions in due course.
• progressed its work toward issuing a second consultation paper on the prudential treatment of crypto-asset exposures of banks. Building on the feedback received from external stakeholders during the first consultation, the Committee plans to publish another consultation paper over the coming month, to finalize the prudential treatment around the end of 2022.
• completed its targeted review of the treatment of cross-border exposures within the European Banking Union (EBU) on the methodology for  global systemically important banks (G-SIBs). The Committee recognized the progress in the development of Banking Union and agreed to give recognition to this progress within the G-SIB framework through the existing methodology, which allows for adjustments to be made according to supervisory judgment. Under the agreement, a parallel set of G-SIB scores will be calculated for Banking Union-headquartered G-SIBs and used to adjust their bucket allocations. The parallel scores recognize 66% of the score reduction that would result from treating intra-EBU exposures as domestic exposures under the G-SIB scoring methodology. The Committee's agreement will not affect the classification of any banks as G-SIBs or the scores or bucket allocations of banks outside the Banking Union. In due course, the European Union authorities will publish a more detailed description of the methodology and requirements for relevant EBU-headquartered banks to publish the cross-jurisdictional indicators needed to calculate the parallel set of scores.
• ·noted that it will continue to assess the supervisory and policy implications related to third- and fourth-party risk management and concentration risk, in coordination with other global standard-setting bodies and international forums.

Related Link: Press Release

Keywords: International, Banking, EU, ESG, Climate Change Risk, G-SIB, Disclosures, Cross-Border Exposures, Basel, Crypto-Assets, Regulatory Capital, G-SIB Framework, Banking Union, Systemic Risk, BCBS