The Basel Committee on Banking Supervision, during its virtual meeting on December 5 and 7, deliberated on significant policy and supervisory measures, demonstrating a commitment to addressing evolving challenges in the financial landscape.
Cryptoassets: Targeted Revisions and Consultation
The Committee reviewed aspects of the prudential standard for banks’ exposure to cryptoassets, culminating in a decision to initiate targeted revisions. It will undertake a consultation, focusing on criteria for stablecoins to receive preferential “Group 1b” regulatory treatment. Additionally, technical amendments will be proposed to foster a consistent understanding of the standard. The Committee affirmed that cryptoassets using permissionless blockchains present inherent risks that current mitigants cannot sufficiently address, resulting in the retention of existing treatments. A consultation paper detailing these considerations is slated for release this month.
Furthermore, the Committee assessed risks associated with banks offering cryptoasset custody services, emphasizing the operational risks involved. It underscored the necessity for banks to fully implement operational resilience principles and those governing operational risk. Ongoing monitoring of banks’ crypto asset custody activities will inform potential future actions in response to market developments.
Interest Rate Risk in the Banking Book (IRRBB): Targeted Adjustments and Consultation
Addressing interest rate risk, the Committee agreed to consult on targeted adjustments to the standard on IRRBB. These adjustments, stemming from a review initiated as part of the 2023–24 work programme, propose updates to interest rate shocks to reflect movements since the standard’s initial publication in April 2016. The forthcoming consultation paper aims to provide industry stakeholders with an opportunity to contribute to this process.
Global Systemically Important Banks (G-SIBs) and Window Dressing
The Committee deliberated on empirical studies highlighting “window-dressing” behavior by certain banks within the G-SIB framework. Recognizing the unacceptable nature of such behavior, the Committee plans to consult in 2024 on potential policy options to mitigate window-dressing risks. To inform this initiative, the Committee will gather higher frequency data, emphasizing its commitment to maintaining the integrity of financial markets.
Climate-related Financial Risks: Integration and Considerations
In line with its holistic approach to climate-related financial risks, the Committee discussed risk management considerations associated with transitioning to a low carbon economy and related physical risks. This ongoing dialogue complements previous initiatives, including supervisory principles, FAQs, and a proposed disclosure framework.
Implementation of Basel III Reforms: Regulatory Consistency Assessment
As part of the Regulatory Consistency Assessment Programme, the Committee reviewed and approved assessment reports on the implementation of the Net Stable Funding Ratio and large exposures framework by Mexico and Switzerland. Additionally, the follow-up implementation assessment report on the Liquidity Coverage Ratio by Mexico gained approval. These reports will be made public this month.
The Basel Committee’s proactive stance underscores its commitment to shaping a resilient and forward-looking global banking framework. The forthcoming consultations provide a platform for industry stakeholders to contribute valuable insights, fostering a collaborative and robust regulatory environment.