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Overall, further progress has been made since last year’s update to the G20 Leaders in implementing the Basel III standards in a full, timely and consistent manner. In addition, banks have continued to build capital and liquidity buffers while reducing their leverage.
The Basel III standards for capital, liquidity and global systemically important banks (G-SIBs) have generally been transposed into domestic regulations within the time frame set by the Basel Committee. The key components, including the risk-based capital standards and the Liquidity Coverage Ratio (LCR), are now enforced by all member jurisdictions. Further, member jurisdictions continue their efforts to adopt other Basel III standards, including those relating to margin requirements for non-centrally cleared derivatives, the Net Stable Funding Ratio (NSFR), the leverage ratio, revised securitisation framework, standardised approach for measuring counterparty credit risk exposures (SA-CCR), capital requirements for bank exposures to central counterparties (CCPs) and revised Pillar 3 disclosure requirements.
However, challenges remain, in particular regarding the timely regulatory adoption of these standards. While some member jurisdictions have implemented the standards based on the agreed timelines, others have faced delays so that, in many jurisdictions, rules have yet to be finalised or put into effect. Further, some jurisdictions have reported that their implementation of certain standards has been or will be delayed, compared with the implementation dates agreed by the Committee, because of their concerns over the pace of implementation in other jurisdictions. This is notably the case for the NSFR, with only 10 member jurisdictions having final rules in force. Consistent with last year’s report, limited progress has been also observed in the implementation of capital requirements for equity investments in funds. Further, a considerable number of Basel standards remain due to be transposed into domestic regulations over the next few years, including the requirements for total loss-absorbing capacity (TLAC) holdings and disclosure, the supervisory framework for measuring and controlling large exposures (LEX), and the final Basel III reforms. In December 2017, the Group of Governors and Heads of Supervision (GHOS) finalised these reforms and members reaffirmed their expectation of full, timely and consistent implementation of all elements of the package.
The Committee urges member jurisdictions to complete the implementation of standards whose implementation date has already passed and to start the process of transposing the final Basel III reforms into their domestic (national or regional) banking regulations. In order to maximise the benefits of these reforms, the Basel Committee will continue to closely monitor the implementation and impact of its standards and report to the G20 on progress.
Regarding the consistency of regulatory implementation, the Committee has published its assessment reports on all 27 members regarding their implementation of Basel risk-based capital and LCR standards. Further, assessments of implementation of the Basel G-SIB framework were published in June 2016, covering the five jurisdictions that were home to G-SIBs at that time. These reviews have shown that the domestic regulations are generally consistent with Basel III standards, while further consistency may be achieved in some jurisdictions. Importantly, most member jurisdictions have actively rectified observed deviations by amending their domestic regulations in the course of the assessment.