Tuesday, May 2, 2017

Basel Sharpens Focus on Banking Supervision

Will also improve confidence in prudential ratios

The Basel Committee on Banking Supervision has announced its work program themes for 2017 and 2018 to include a greater focus on strengthening supervision by member jurisdictions. In addition, the Committee still remains dedicated to its core goals of:


  • finalizing its existing policy initiatives; 
  • monitoring emerging risks;
  • assessing the effects of the Committee's post-crisis reforms; and 
  • ensuring full, timely, and consistent implementation of the Committee's standards.


Supervisory Powers


The Committee’s focus on supervisory powers over the next year will include improving supervisory tools and techniques by developing case studies and identifying best practices, where appropriate, in a number of key areas. Specifics about these key areas were not announced but will emerge over the course of the year. The Committee did, however, disclose that they will be making a deeper assessment of:


  • the varying supervisory actions taken under Pillar 2 in different jurisdictions;
  • stress testing practices; 
  • assessing the supervisory impact of the growth of financial technology; and 
  • sharing best practices on how supervisors are to assess expected credit loss provisioning practices for regulatory capital purposes.


Improving Ratios


As part of their effort to ensure timely and consistent application of Basel standards, the Committee will concentrate on improving confidence in prudential ratios. Key to this effort is completing the seven remaining RCAP assessments related to the Liquidity Coverage Ratio. So the Committee plans to make the RCAP process a priority. Following the completion of that effort, the Committee announced that they will commence reviews of the implementation of other standards, starting with the Net Stable Funding Ratio and Large Exposures framework, with the first reports discussed and published in 2018. The Committee said they will also review banks' implementation of the standard on interest rate risk in the banking book.


In addition, through its Basel Consultative Group, the Committee will discuss implementation challenges of the regulatory framework with a broad range of non-BCBS member jurisdictions from emerging market economies.


Details of the Committee’s work program themes are available via: http://www.bis.org/bcbs/bcbs_work.htm