The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS, endorsed a coordinated approach to mitigate COVID-19 risks to the global banking system. The GHOS members agreed to mark, with the present agreement on the Basel III framework, a clear end to the post-crisis Basel III policy agenda. Any further potential adjustments to Basel III will be limited in nature and consistent with the evaluation work of BCBS. Going forward, the Basel III-related work of BCBS will focus on monitoring the implementation, timeliness, and consistency of Basel standards through the Regulatory Consistency Assessment Program as well as completing an evidence-based evaluation of the effectiveness of these reforms, also taking into consideration the lessons learned from the COVID-19 crisis.
The GHOS also endorsed a series of recommendations from the Basel Committee to focus its policy and supervisory agenda on future risks to the global banking system and its vulnerabilities. The recommendations followed a strategic review conducted by the Committee over the past year. The future work of the Basel Committee will focus on new and emerging topics, including structural trends in the banking sector, the ongoing digitalization of finance, and climate-related financial risk. Against the backdrop of the evolving risks and vulnerabilities in light of the ongoing COVID-19 crisis, GHOS members tasked the Basel Committee with continuing to pursue a coordinated approach in responding to the crisis, to preserve a global level playing field, and to avoid regulatory fragmentation. The approach comprises the following elements:
- Ongoing monitoring and assessment of vulnerabilities and risks to the global banking system from COVID-19, along with information-sharing of supervisory insights during the crisis
- Encouraging the use of flexibility embedded in the Basel framework, where relevant
- Monitoring the implementation of temporary adjustments to mitigate current risks to the banking system, to ensure they are consistent with the objectives of the Basel framework and are unwound in a timely manner
- Adopting additional global measures in a coordinated manner, where necessary and prudent
The oversight body of BCBS noted that using capital and liquidity resources to help banks to absorb shock during the ongoing COVID-19 crisis "should take priority at present." GHOS members strongly support the repeated guidance from the Basel Committee that a measured drawdown of these buffers is appropriate in the current period of stress and until the COVID-19 crisis is over. After the crisis, supervisors will provide banks with sufficient time to rebuild their buffers, taking account of economic, market, and bank-specific conditions.
Related Link: Press Release
Keywords: International, Banking, COVID-19, GHOS, RCAP, Basel, Regulatory Framework, Liquidity Risk, Climate Change Risk, Regtech, BCBS
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