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Policy development
The Committee will continue to pursue its post-crisis reform agenda, with a focus on restoring confidence in capital ratios. This includes revisions to existing methods of measuring risk-weighted assets. For example, revisions of the standardised approaches for credit, market and operational risk have been published for consultation. In addition, other policy development work is well advanced. This includes a capital floor based on standardised approaches, consideration of simple, transparent and comparable criteria for securitisations, the fundamental review of the trading book and interest rate risk in the banking book. There is also ongoing work with the Financial Stability Board related to the adequacy of loss-absorbing capacity of global systemically important banks (G-SIBs) in resolution.
In addition to existing policy initiatives, there are three policy-related issues which the Committee is undertaking:
Interaction, coherence and overall calibration
Now that the major elements of the reform agenda have been agreed, the Committee will assess the interaction, coherence and overall calibration of the reform policies. The aim of the Committee's work on coherence is to consider how the various regulatory metrics interact and whether the calibration and design of the various elements of the framework are consistent with their intended objectives.
Sovereign risk
The Committee has initiated a review of the existing regulatory treatment of sovereign risk and will consider potential policy options. The review will be conducted in a careful, holistic and gradual manner.
Stress testing
The Committee plans to further investigate current approaches to stress testing across jurisdictions and to discuss the role of stress testing in the Basel framework, particularly how stress testing relates to the existing Pillar 1 (minimum requirements) regulatory framework. This work follows the increasing importance of stress testing in many countries, both as a supervisory tool and as a method for determining bank capital requirements.
Simplicity, comparability and risk sensitivity
Work on simplicity, comparability and risk sensitivity combines the issues emerging from the Committee's top-down review of the framework along with the bottom up work on risk-weighted asset variability, which were detailed in the Committee's November 2014 report to the G20 Leaders. The G20 report sets out the measures the Committee is taking to simplify the regulatory framework, and to improve consistency and comparability in bank capital ratios, thereby restoring confidence in risk-weighted capital ratios.
Monitoring and assessing implementation
The Committee will continue to monitor and assess its members' implementation of the Basel framework. The Regulatory Consistency Assessment Programme (RCAP) is the means by which the Committee evaluates member jurisdiction's adoption of its standards. The RCAP will be expanded to also cover Basel III's liquidity standards and the frameworks for global and domestic systemically important banks.
Improving the effectiveness of supervision
The Committee will continue its work on improving the effectiveness of supervision. In particular, the Committee will focus on supervisory practices related to stress testing, valuation practices and the role of Pillar 2 in the capital framework