Sunday, May 17, 2015

BIS Progress Report on Basel Framework Implementation


Author: David Schwartz J.D. CPA

At the end of April, the Bank for International Settlements (BIS) issued its eighth progress report on the adoption of the Basel regulatory framework.  This report provides a high-level overview of the progress made by Basel Committee member states in adopting the Basel II, Basel 2.5, and Basel III framework as of the end of March 2015.  

The report takes a look at the domestic regulatory rule making going on in the various member states, and to what extent these efforts accord with internationally agreed timeframes for adoption.   Included in this report is the the status of adoption of:

  • Risk-based capital standards,
  • Standards for global and domestically systematically important banks (SIBs), 
  • the Basel III leverage ratio, and
  • the liquidity coverage ratio (LCR).
The exhibits in the report make it clear that Russia remains behind all other member states in the status of its Basel standards adoption process.  Having only adopted standards with regard to risk-based capital requirements, Russia lags behind in Basel II and Basel 2.5 standards, as well as work on the LCR and leverage ratio. Russia’s regulatory methodology for identifying D-SIBS has been online since 2014, but methodologies for identifying G-SIBs, however, are still in the nascent stages.

The US and EU (including the European states that follow the EU process) seem to be on par in their respective Basel implementation processes.  Both still have work to do implementing LCR disclosure rules, however.  Surprisingly, Japan has still not finalized work on Risk-base capital requirements or the LCR. They expect full implementation of standards in both areas by the end of 2015.

In addition to examining progress in implementation of Basel standards, BIS is also looking into how consistently these standards are being implemented across the various states, as well as analyzing the consistency of regulatory outcomes.  Look forward to more findings on these two topics in upcoming months.

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