Basel Committee finalises stress-testing principles, reviews ways to stop regulatory arbitrage behaviour, agrees on annual G-SIB list, discusses leverage ratio, crypto-assets, market risk framework and implementation

Press release  | 
20 September 2018

The Basel Committee on Banking Supervision met in Basel on 19-20 September to discuss a range of policy and supervisory issues, and to take stock of its members' implementation of post-crisis reforms.

The Committee discussed:

  • the results of the annual assessment exercise for global systemically important banks (G-SIBs). These were approved by the Committee and will be submitted to the Financial Stability Board before it publishes the 2018 list of G-SIBs. The Committee also agreed to publish the high-level indicator values of all the banks that are part of the G-SIB assessment exercise; 
  • progress on revising the market risk framework. The Committee expects to finalise these revisions around the end of the year; 
  • banks' responses to regulatory change, including potential arbitrage transactions. The Committee will publish a newsletter on leverage ratio window-dressing behaviour, whereby banks adjust their balance sheets around regulatory reporting dates to influence reported leverage ratios. The Committee will consider Pillar 1 (minimum capital requirements) and Pillar 3 (disclosure) measures to prevent this behaviour. The Committee also agreed to clarify the treatment of "settled-to-market" derivatives in the Committee's liquidity standards and has published a response to frequently asked questions on this topic; and
  • the outcome of its review of the impact of the leverage ratio on client clearing. It also discussed an associated joint consultation paper by the Committee, Financial Stability Board, Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions on the effects of post-crisis reforms on incentives to centrally clear over-the-counter derivatives, consistent with the G20 Leaders' commitments to reform OTC derivatives markets. The Committee agreed to publish a consultation paper next month to seek the views of stakeholders as to whether the exposure measure should be revised and, if so, on targeted revision options.

The Committee also agreed to publish a revised version of its Principles on Stress Testing, following the consultation paper published in December 2017. The revised principles will be published next month.

The Committee exchanged views on emerging conjunctural and structural risks. Part of this discussion focused on banks' exposures to crypto-assets and the risks such assets may pose. The Committee agreed on further work on this topic that will inform its views on banks' crypto-asset exposures.

Committee members reiterated their expectation of full, timely and consistent implementation of the Basel III standards for internationally-active banks. As part of the Regulatory Consistency Assessment Programme, the Committee assessed Saudi Arabia's implementation of the Net Stable Funding Ratio and large exposures standard as "compliant"; the reports will be published soon.

The next meeting of the Basel Committee is scheduled for 26-27 November 2018 in Abu Dhabi.