Basel Committee discusses policy and supervisory initiatives and approves implementation reports

The Basel Committee on Banking Supervision met in Madrid on 30-31 October 2019 to discuss a range of policy and supervisory issues, and to take stock of its members' implementation of post-crisis reforms.

At its meeting, the Committee:

• agreed to consult on a final set of limited and targeted adjustments to the credit valuation adjustment risk framework. The paper will be published in November. Members reaffirmed their expectation to implement the framework alongside the accompanying Basel III standards on 1 January 2022;
• agreed to consult on a set of revised disclosure requirements related to the market risk framework finalised in January 2019, and to consult on disclosure templates related to banks' sovereign exposures which would be voluntary in nature, with jurisdictions free to decide whether or not to implement them. These papers will be published next month;
• agreed to publish a discussion paper on the prudential treatment of cryptoassets. The Committee reiterated its view that the prudential treatment of banks' cryptoasset exposures should appropriately reflect the high degree of risk of cryptoassets. In light of ongoing initiatives in crypto-asset markets, the Committee will seek the views of stakeholders on a wide range of issues related to the prudential treatment of crypto-assets;
• agreed to consult on guidelines to enhance cooperation between prudential regulatory authorities and authorities in charge of anti-money laundering and combatting the financing of terrorism. These proposed guidelines will be published next month; and
• reviewed the reports that assessed the implementation of the Net Stable Funding Ratio and large exposures standards in Argentina and China. Publication of these reports is expected in November.

The Committee discussed its work related to the banking and supervisory implications of financial technology. It agreed to publish a report on open banking and application programming interfaces next month. Going forward, the Committee will conduct a set of "deep dive" assessments related to: (i) the risk management challenges associated with the use of artificial intelligence and machine learning in financial services; (ii) banks'; dependencies on unregulated third parties and the implications for outsourcing supervisory regimes; and (iii) supervisory challenges related to data governance and management, data security, portability and recovery.

The Committee took stock of benchmark rate reforms, and discussed the potential regulatory and supervisory implications stemming from banks' transition to alternative reference rates. The Committee places high priority on this issue and expects all banks to be adequately prepared to meet the transition timeline. The Committee will consider whether any further regulatory or supervisory measures are warranted to help achieve this outcome.

As part of its ongoing work programme on evaluating and monitoring the impact of its post-crisis reforms, the Committee discussed the usability of capital buffers and has published a newsletter to reiterate the importance of the capital buffer framework and to emphasise that buffers are designed to be usable.

The Committee also discussed additional supervisory initiatives, including the implementation of its guidance for managing risks associated with the settlement of foreign exchange transactions and the need for further measures to mitigate such risks. The Committee also exchanged views on work on climate-related financial risks, and on the audit of expected credit loss accounting.

Note to editors:

The Basel Committee is the primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. The Committee reports to the Group of Central Bank Governors and Heads of Supervision and seeks its endorsement for major decisions. The Committee does not possess any formal supranational authority and its decisions do not have legal force. Rather, the Committee relies on its members' commitments to achieve its mandate. The Basel Committee is chaired by Pablo Hernández de Cos, Governor of the Bank of Spain.

More information about the Basel Committee is available here.