The Basel Committee on Banking Supervision (BCBS) announced updates on its work in the areas of climate-related financial risks, cryptoassets, the assessment methodology for global systemically important banks (G-SIBs), and the final Pillar 3 disclosure standards for banks. This announcement follows discussions during the Committee's October and November 2021 meetings, which also had on the agenda the risks and vulnerabilities to the global banking system, in addition to the policy and supervisory initiatives. Later this month, BCBS plans to consult on a set of principles for the effective management and supervision of climate-related financial risks at the internationally active banks.
The following are the other key BCBS announcements:
- Post a review of the comments received on the initial consultation on the prudential treatment of cryptoasset exposures of banks, BCBS plans to further consult on this by mid-2022.
- After discussing the feedback to its earlier proposal for a technical amendment to the process for reviewing the G-SIB assessment methodology, BCBS agreed to proceed with the proposed approach to replacing the existing three-year review cycle of the methodology, with a process of ongoing monitoring and review to ensure that it remains appropriate over time. In the near term, BCBS will review the implications of developments related to the European Banking Union for the G-SIB methodology, including a targeted review of the treatment of cross-border exposures on the G-SIB methodology.
- BCBS approved the final standards for Pillar 3 disclosures for the revised market risk framework and for a set of voluntary disclosures for sovereign exposures of banks, with the final disclosure standards expected to be published in the coming weeks.
- BCBS discussed the impact of the prolonged low interest-rate environment and the evolving outlook on the profitability, business models, and risk-taking behavior of banks. A deep-dive thematic analysis took stock of the cyclical and structural drivers behind interest rate dynamics and bank responses, the degree of heterogeneity across banking systems, and the main supervisory challenges and risks. BCBS will continue to assess these issues.
- Members took stock of the operational resilience of banks, including the reliance on third- and fourth-party service providers. BCBS will continue to assess the supervisory and policy implications of third- and fourth-party and concentration risk, in coordination with other global standard-setting bodies and international forums.
Related Link: Press Release
Keywords: International, Banking, Securities, Climate Change Risk, Crypto Assets, G-SIB Assessment, ESG, G-SIB, Disclosure, Pillar 3, Market Risk, Basel, BCBS
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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