BIS' Stefan Ingves: Basel III: Are we done now?

29 January 2018

The Chairman of the Basel Committee said that work remains to implement Basel III nationally in a full, timely and consistent manner; evaluate its effectiveness in reducing the excessive variability of risk-weighted assets; and continue to monitor and assess emerging risks.

Mr Ingves starts with brief review of the Basel III framework, which has been ten years in the making. The Basel III framework is a central element of the Basel Committee's response to the global financial crisis.

The set of Basel III reforms addresses a number of shortcomings in the pre-crisis regulatory framework and provides a foundation for a resilient banking system that will help mitigate the impact of future banking crises and the build-up of systemic vulnerabilities. The post-crisis framework will also help the banking system support the real economy and contribute to economic growth.

The Basel Committee's standards are global minimum standards. The Committee has no supranational authority, its decisions carry no legal force, and it cannot impose fines or sanctions. Rather, once the Committee agrees on a standard, its member jurisdictions are responsible for converting this standard into law or regulation. So internationally agreed standards that are not properly implemented will ultimately have no impact in practice. It is therefore imperative that the Basel standards are effectively implemented by all the Committee's jurisdictions.

To this end, the Committee's flagship Regulatory Consistency Assessment Programme (RCAP) monitors the timely adoption of Basel standards across jurisdictions and reviews whether standards are completely and consistently adopted by member jurisdictions. They also highlight any deviations from the Basel framework. As a result of the RCAPs, over 1,200 deviations were identified as part of the peer reviews focusing on the initial Basel III capital reforms. Two thirds of Basel Committee members have risk-weighted capital rules that are considered compliant or largely compliant with the Basel standards.

Looking forward, the RCAP will continue to play a key role in ensuring that the recently finalised Basel III reforms are implemented as agreed by the Committee. But Mr Ingves stresses three points:

• First, in developing its standards, the Committee actively seeks the views of all stakeholders, public and private.
• Second, in endorsing the finalised Basel III reforms, the Group of Governors and Heads of Supervision (GHOS) has unanimously reaffirmed that they expect full, timely and consistent implementation "of all elements" of the Basel III package (BCBS (2017a)).
• Third, the move to national implementation should not be read as an invitation to reopen policy issues and debates at a domestic level. While the varying legislative and procedural arrangements used to implement Basel standards across the Committee's membership must be fully respected, it is concerning to see ongoing lobbying efforts by some banks and other stakeholders to undo or dilute aspects of the agreed Basel standards in some jurisdictions.

At the end of his speech Mr Ingves discusses further important areas as excessive RWA, emerging risks, behavioural responses to post-crisis reforms or supervision.

Full speech

© BIS - Bank for International Settlements