16 July 2018

Financial Times: Banks under watch over exposure to cryptocurrencies

Global banking regulators are assessing the size of banks’ exposure to “crypto-assets” such as bitcoin and looking at introducing capital safeguards, in a move that could deter banks from embracing the nascent market.

A report revealed that the Basel Committee on Banking Supervision is “conducting an initial stock take on the materiality of banks’ direct and indirect exposures to crypto-assets”.

Once it has collected the data and assessed national rules on crypto-assets, it will “consider whether to formally clarify the prudential treatment of crypto-assets across the set of risk categories”.

The appraisal was included in a report on crypto-assets by the Financial Stability Board, the group of policymakers and regulators that makes recommendations to the G20.

Current Basel rules on bank capital do not explicitly refer to crypto-assets. However, there are minimum capital requirements and liquidity rules for so-called “other assets”.

Any move would come at a time when big banks have had to bolster their capital buffers after the financial crisis. Under tougher Basel III rules they will also have to set aside more funds over the next decade.

In its report, the FSB also announced that it had published a framework, developed with the Bank of International Settlement’s Committee on Payments and Market Infrastructures, for monitoring the risks to financial stability from crypto-assets.

The FSB said that while crypto-assets “do not pose a material risk to global financial stability at this time”, it endorsed “vigilant monitoring” due to both the speed of developments and “data gaps”.

 “Monitoring the size and growth of crypto-asset markets is critical to understanding the potential size of wealth effects, should valuations fall,” the FSB said.

Full article on Financial Times (subscription required)

FSB report sets out framework to monitor crypto-asset markets

© Financial Times