Basel Committee Highlights Implementation Progress

The Basel Committee on Banking
Supervision has issued a report stating that overall progress is being made in
introducing the Basel III requirements, although it notes that some
jurisdictions are facing “challenges” to meet implementation deadlines.

In its seventh report on the progress
of implementing the Basel III standards, the Committee notes: “The Basel III
capital and liquidity standards have generally been transposed into domestic
regulations within the time frame set by the Basel Committee. Further progress
has been made towards implementing the Basel III framework since last year’s
report.”
 

The report highlights that some of the
key Basel III requirements, including the risk-based capital standards and the
Liquidity Coverage Ratio (LCR), are now enforced by all G20 member
jurisdictions.
 

It also states that all member
jurisdictions that are home jurisdictions to global systemically important
banks (G-SIBs) have the G-SIB framework in force and that these jurisdictions
continue their efforts to adopt other Basel III standards, including the
leverage ratio and the Net Stable Funding Ratio (NSFR).

Meanwhile, the reports claims that
non-Basel Committee jurisdictions also report “substantial progress” in
adopting the framework’s core elements.

With regards to the consistency of implementation, the Basel
Committee finds that the domestic regulations being enacted are generally
consistent with Basel III standards and that most member jurisdictions have rectified
deviations from these standards highlighted in previous reports. 

In terms of regulatory outcomes, the Committee says that the
banks have continued to build their capital and liquidity buffers since last
year’s report. 

It adds: “In particular, all internationally active banks
meet the fully phased-in risk-based capital and leverage ratio requirements.
Most of these banks also meet the fully phased-in liquidity standards, ie both
the LCR and NSFR, ahead of the 2019 deadline.” 

Despite this progress, the Committee notes that there are a
number of revised Basel standards awaiting transposition into domestic
regulations over the next couple of years and that some jurisdictions are
reporting “challenges” in meeting the agreed upon implementation deadlines. 

These include the margin requirements for non-centrally
cleared derivatives, due to go into effect in September 2016, a standardised
approach for measuring counterpart risk and capital requirements for central
counterparty exposures, both of which are due to be implemented by January
2017. 

According to the report, the biggest challenges in
implementing the Basel III requirements relate to domestic legislative or
rule-making processes. Additionally, it says that some jurisdictions
report that banks face difficulties in adjusting their information systems to
meet and report on the new requirements.

“Delayed implementation may have implications
for the level playing field, and puts unnecessary pressure on jurisdictions
that have implemented the standards based on the agreed timelines. A concurrent
implementation of global standards is all the more important, as many
jurisdictions serve as hosts to internationally active banks,” says the
Committee in the report.
 

It concludes: “Overall, further progress has been made
since last year’s update to the G20 Leaders in implementing the Basel III
standards in a full, timely and consistent manner. Banks continue to build
higher and better quality capital and liquidity buffers while reducing their
leverage.

“However, challenges remain, in
particular regarding the timely regulatory adoption of Basel standards in some
jurisdictions. In order to maximise the benefits of its reforms, the Basel
Committee will continue to monitor closely the implementation and impact of its
standards and report to the G20 on progress.
 

 

galen@profit-loss.com

@Galen_Stops

@Profit_and_Loss

 

Galen Stops

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