Basel Committee proposes revisions to minimum capital requirements for market risk

Press release  | 
22 March 2018

The Basel Committee on Banking Supervision today issued Revisions to the minimum capital requirements for market risk for consultation.

Improvements to the capital requirements for trading activities are a key component of the Basel Committee's overall efforts to reform global regulatory standards in response to the global financial crisis.

The proposals aim to address issues that the Basel Committee has identified in the course of monitoring the implementation and impact of the market risk standard issued in January 2016: Minimum capital requirements for market risk.

The proposed changes include:

  • changes to the measurement of the standardised approach to enhance its risk sensitivity, including changes to FX risk;
  • recalibration of standardised approach risk weights applicable to general interest rate risk, FX risk and equity risk;
  • revisions to the assessment process to determine whether a bank's internal risk management models appropriately reflect the risks of individual trading desks;
  • clarifications on the requirements for identification of risk factors that are eligible for internal modelling; and
  • clarifications on the scope of exposures that are subject to market risk capital requirements.

In addition, following the Committee's consultation in June 2017 on a simplified alternative to the standardised approach, this consultative document proposes a recalibration of the Basel II standardised approach for banks with less material market risk exposure.

These proposals follow the decision by the Group of Governors and Heads of Supervision, the Committee's oversight body, to extend the implementation date of the market risk standard to 1 January 2022 to give banks additional time to develop systems infrastructure and for the Committee to address certain aspects of the framework.

The Committee plans to finalise any revisions to the market risk standard as soon as possible to allow enough time for national implementation and for banks to develop the necessary infrastructure. The proposed revisions are designed to support smooth implementation of the standard.

The Committee welcomes comments on the consultative document. Comments should be uploaded here by Wednesday 20 June 2018. All comments will be published on the website of the Bank for International Settlements unless a respondent specifically requests confidential treatment.