This follows discussions on risks and vulnerabilities to the global banking system, as well as policy and supervisory initiatives, at its meetings of 21 October, and 5 and 8 November.
- Basel Committee agrees to consult on principles for the effective management and supervision of climate-related financial risks.
- Considers feedback regarding consultation on cryptoasset exposures,
reiterates importance of conservative risk-based approach and agrees
next steps.
- Finalises revised process for reviewing G-SIB assessment methodology and agrees on scope of additional issues to review.
The Basel Committee today announced updates on its work regarding
climate-related financial risks, cryptoassets, the G-SIB assessment
methodology and disclosure standards.
Climate-related financial risks
The Committee is currently assessing and developing a suite of
potential measures – spanning disclosure, supervisory and regulatory
measures – to address climate-related financial risks to the global
banking system, following the publication of a series of analytical reports earlier this year.
To that end, the Committee agreed to consult later this month on a
set of principles for the effective management and supervision of
climate-related financial risks at internationally active banks.
On disclosure measures, the Committee welcomed
the establishment of the International Sustainability Standards Board,
and is exploring the use of the Pillar 3 framework to promote a common
disclosure baseline for climate-related financial risks. The Committee
also agreed to continue to explore the relative merits of potential
regulatory measures.
Cryptoassets
The Committee reviewed the comments received regarding its consultation
on the prudential treatment of banks' cryptoasset exposures. Members
reiterated the importance of developing a conservative risk-based global
minimum standard to mitigate prospective risks from cryptoassets to the
banking system, consistent with the general principles set out in the
consultative document. Accordingly, the Committee will further specify a
proposed prudential treatment, with a view to issuing a further
consultative document by mid-2022.
G-SIB assessment methodology
The Committee discussed the feedback to its consultation
earlier this year for a technical amendment to the process for
reviewing the assessment methodology for global systemically important
banks (G-SIBs). The Committee agreed to
proceed with its proposed approach to replacing the existing three-year
review cycle of the methodology with a process of ongoing monitoring
and review in order to ensure that it remains appropriate over time. In
the near term, the Committee will review the implications of
developments related to the European Banking Union for the G-SIB
methodology. In particular, this will include a targeted review of the
treatment of cross-border exposures within the Banking Union on the
G-SIB methodology.
Disclosure standards
The Committee approved the final standards for Pillar 3 disclosures
related to the revised market risk framework and a set of voluntary
disclosures for banks' sovereign exposures. This follows the Committee's
consultation on these standards in 2019. The final disclosure standards will be published in the coming weeks.
Risks and vulnerabilities to the global banking system
The Committee discussed the impact of the prolonged low interest rate
environment and its evolving outlook on banks' profitability, business
models and risk-taking behaviour. A deep-dive thematic analysis took
stock of the cyclical and structural drivers behind interest rate
dynamics and banks' responses, the degree of heterogeneity across
banking systems, and the main supervisory challenges and risks. The
Committee will continue assessing these issues.
Members also took stock of banks' operational resilience, including
the reliance on third- and fourth-party service providers. The Committee
will continue to assess the supervisory and policy implications related
to third- and fourth-party risk management and concentration risk, in
coordination with other global standard-setting bodies and international
forums.
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