Governors and Heads of Supervision reaffirm expectation to implement Basel III in full and as fast as possible; provide direction on future work on climate-related financial risks and cryptoassets

• The Basel Committee's oversight body reiterates its expectation to implement all aspects of the Basel Framework consistently and as fast as possible.
• Provides direction to the Basel Committee on its work on climate-related financial risks and cryptoassets. 
• Reviews the Committee's work programme and reaffirms the importance of a stable regulatory framework to facilitate implementation.

The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, met on 12 September to reaffirm its expectations on implementing Basel III and to provide direction on key areas of work by the Committee.

The resurgence of inflation in many jurisdictions, coupled with a deteriorating macroeconomic outlook and tighter financial conditions, may expose vulnerabilities accumulated in the financial system. While the global banking system has remained broadly resilient to date, thanks in part to the Basel III reforms implemented after the Great Financial Crisis, GHOS members underlined the importance of banks and supervisors continuing to closely monitor, assess and mitigate emerging risks and vulnerabilities. The unwinding of public support measures – which were critical in shielding banks from losses over the past two years – places greater importance on the resilience of the banking sector to absorb potential shocks.

Basel III implementation

Against that backdrop, GHOS members took stock of the implementation status of the outstanding Basel III reforms. These standards, finalised in 2017, seek to strengthen the resilience of bank capital by addressing some of the weaknesses in the regulatory framework that were exposed by the Great Financial Crisis, including by reducing excessive variability in risk-weighted assets and improving the comparability and transparency of banks' risk-based capital ratios. Addressing these weaknesses remains as important today as it was pre-pandemic.

More than two thirds of jurisdictions plan to implement all, or the majority of, the standards in 2023 or 2024, with the remaining jurisdictions planning to implement Basel III in 2025. There are only a limited set of technical standards that are particularly subject to an implementation delay.

GHOS members unanimously reaffirmed their expectation of implementing all aspects of the Basel III framework in a full and consistent manner, and as soon as possible, in order to provide a regulatory level playing field for internationally active banks. These banks should continue preparing for the forthcoming implementation of the standards.

Basel Committee work priorities

The GHOS also reviewed the Committee's work on climate-related financial risks and cryptoassets. On the former, GHOS members reaffirmed the scope of the Committee's work – which currently focuses on climate-related financial risks – and endorsed the Committee's holistic approach to developing and assessing potential measures related to disclosure, supervision and/or regulation. On cryptoassets, members reiterated the importance of designing a robust and prudent regulatory framework for banks' exposures to cryptoassets that promotes responsible innovation while preserving financial stability. The GHOS tasked the Committee with finalising such a framework around the end of this year.

GHOS members also took note of the ongoing work by the Committee to evaluate the impact of Basel III standards already implemented on the resilience and behaviour of the banking system. Members emphasised the importance of focusing on the implementation of outstanding Basel III reforms before considering any policy or supervisory implications related to findings of the Committee's evaluation work.

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 has no formal supranational authority, and its decisions have no legal force. Rather, the Committee relies on its members' commitments to achieve its mandate. The Group of Central Bank Governors and Heads of Supervision is chaired by Tiff Macklem, Governor of the Bank of Canada. 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.