Basel Committee advances work on addressing climate-related financial risks, specifying cryptoassets prudential treatment and reviewing G-SIB assessment methodology

Press release  | 
09 November 2021
  • Basel Committee agrees to consult on principles for the effective management and supervision of climate-related financial risks.
  • Considers feedback regarding consultation on cryptoasset exposures, reiterates importance of conservative risk-based approach and agrees next steps.
  • Finalises revised process for reviewing G-SIB assessment methodology and agrees on scope of additional issues to review.

The Basel Committee today announced updates on its work regarding climate-related financial risks, cryptoassets, the G-SIB assessment methodology and disclosure standards. This follows discussions on risks and vulnerabilities to the global banking system, as well as policy and supervisory initiatives, at its meetings of 21 October, and 5 and 8 November.

Climate-related financial risks

The Committee is currently assessing and developing a suite of potential measures – spanning disclosure, supervisory and regulatory measures – to address climate-related financial risks to the global banking system, following the publication of a series of analytical reports earlier this year.

To that end, the Committee agreed to consult later this month on a set of principles for the effective management and supervision of climate-related financial risks at internationally active banks.

On disclosure measures, the Committee welcomed the establishment of the International Sustainability Standards Board, and is exploring the use of the Pillar 3 framework to promote a common disclosure baseline for climate-related financial risks. The Committee also agreed to continue to explore the relative merits of potential regulatory measures.     

Cryptoassets

The Committee reviewed the comments received regarding its consultation on the prudential treatment of banks' cryptoasset exposures. Members reiterated the importance of developing a conservative risk-based global minimum standard to mitigate prospective risks from cryptoassets to the banking system, consistent with the general principles set out in the consultative document. Accordingly, the Committee will further specify a proposed prudential treatment, with a view to issuing a further consultative document by mid-2022. 

G-SIB assessment methodology

The Committee discussed the feedback to its consultation earlier this year for a technical amendment to the process for reviewing the assessment methodology for global systemically important banks (G-SIBs). The Committee agreed to proceed with its proposed approach to replacing the existing three-year review cycle of the methodology with a process of ongoing monitoring and review in order to ensure that it remains appropriate over time. In the near term, the Committee will review the implications of developments related to the European Banking Union for the G-SIB methodology. In particular, this will include a targeted review of the treatment of cross-border exposures within the Banking Union on the G-SIB methodology.

Disclosure standards

The Committee approved the final standards for Pillar 3 disclosures related to the revised market risk framework and a set of voluntary disclosures for banks' sovereign exposures. This follows the Committee's consultation on these standards in 2019. The final disclosure standards will be published in the coming weeks.

Risks and vulnerabilities to the global banking system

The Committee discussed the impact of the prolonged low interest rate environment and its evolving outlook on banks' profitability, business models and risk-taking behaviour. A deep-dive thematic analysis took stock of the cyclical and structural drivers behind interest rate dynamics and banks' responses, the degree of heterogeneity across banking systems, and the main supervisory challenges and risks. The Committee will continue assessing these issues.

Members also took stock of banks' operational resilience, including the reliance on third- and fourth-party service providers. The Committee will continue to assess the supervisory and policy implications related to third- and fourth-party risk management and concentration risk, in coordination with other global standard-setting bodies and international forums.

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.