BCBS Reviews Adoption Status of Basel Standards, Issues Other Updates

The progress report on Basel III adoption sets out the adoption status of Basel III standards for each BCBS member jurisdiction as of the end of September 2022. The report forms part of the Committee's broader Regulatory Consistency Assessment Program (RCAP), which was established to track progress in introducing the corresponding domestic regulations, assess their consistency and analyze regulatory outcomes. The report found that, since the previous report in September 2021, member jurisdictions have made further progress in implementing the Basel III standards with past due dates as well as the finalized reforms with the January 01, 2023 due date. The report highlights that more than two thirds of member jurisdictions plan to implement all, or the majority of, the standards in 2023 or 2024, with the remaining jurisdictions implementing them in 2025. Some of these have already published draft regulations for consultation.

The Basel III monitoring report is based on the December 31, 2021 data for 182 banks, including 117 large internationally active (Group 1) banks (including 30 global systemically important banks or G-SIBs), and 65 other (Group 2) banks. Group 1 banks are defined as internationally active banks that have tier 1 capital of more than EUR 3 billion while all other banks are considered Group 2 banks. The report highlights that the initial Basel III capital ratios increased to 13.3% for Group 1 banks and 17.2% for Group 2 banks, the highest level since the beginning of the exercise in 2012. The average impact of the fully phased-in final Basel III framework on the Tier 1 minimum required capital of Group 1 banks is lower (+2.4%) when compared to the 3.3% increase at the end of June 2021. As of the end of December 2021, Group 1 banks reported regulatory capital shortfalls amounting to EUR 0.1 billion, compared with a shortfall of EUR 2.3 billion at the end of June 2021. The weighted average liquidity coverage ratio (LCR) decreased to 141% for the Group 1 bank sample and to 224% for Group 2 banks. The report also includes special features on banks' exposures to crypto-assets and on capital buffers and total Common Equity Tier 1 (CET1) requirements.

The report on buffer usability and cyclicality assesses the impact and effectiveness of the previously implemented Basel reforms. The report conducts an in-depth analysis of capital buffer usability, countercyclical capital policy, liquidity buffer usability and expected credit loss provisioning, capital and procyclicality in the framework—all areas that were highlighted in the first evaluation report as warranting further consideration. The report finds little evidence to suggest that reluctance by banks to use liquid asset buffers has affected their lending and market activity; it also finds little sign of procyclical effects on lending during the pandemic related to the introduction of the expected credit loss (ECL) framework. Based on the findings of the report as well as the longer-term impact of the pandemic, ongoing geopolitical events, and the potential for new risks to emerge, the Basel Committee stresses the importance of the prudent build-up and use of buffers at banks to smooth the impact of internal and external shocks.

The newsletter on positive cycle-neutral countercyclical capital buffer (CCyB) rates highlights that the Committee supports and sees benefits in the ability of authorities to set a positive cycle-neutral CCyB rate on a voluntary basis. Authorities that implement such an approach should maintain compliance with the existing Basel standards, including the agreed calibration of the minimum requirements and other regulatory buffers. The Committee also notes that circumstances vary across jurisdictions, including the macroeconomic conditions and the range of macroprudential tools available, for example sectoral buffers, and their use to generate sufficient resources for banks to absorb unpredictable shocks. As a result, not all authorities consider a positive cycle-neutral CCyB rate to be appropriate in their jurisdictions.

Related Links

• Report on Adoption of Basel Standards
• Report on Basel III Monitoring Exercise
• Report on Buffer Usability and Cyclicality
• Statement on Positive Cycle-Neutral CCyB Rates

Keywords: International, Banking, Basel III Monitoring, Basel, Regulatory Capital, G Sib, Cryptoassets, CCyB, Liquidity Buffer, Expected Credit Loss, Credit Risk, Lending, RCAP, BCBS