Basel Committee approves annual G-SIBs assessment, updates workplan to evaluate post-crisis reforms

  • Basel Committee discusses Covid-19 risks to banking system; reiterates importance of using capital and liquidity buffers.
  • Approves annual assessment exercise for global systemically important banks (G-SIBs).
  • Updates its workplan to evaluate its post-crisis reforms to incorporate lessons learned from the Covid-19 crisis.

The Basel Committee met on 14, 18 and 25 September 2020 to take stock of Covid-19 risks to the global banking system and related vulnerabilities, and to discuss a range of policy and supervisory initiatives.

The outlook for global financial stability continues to be uncertain. Factors that could heighten risks to the banking system include the trajectory of Covid-19 infections and containment measures, a protracted recovery period, and the unwinding and expiration of support measures. And the banking system’s operational resilience will continue to be tested in light of the increase in remote working and banks’ reliance on technology and third-party service providers.

Against that backdrop, the banking system entered the Covid-19 crisis on a more resilient footing. Thanks in part to the Basel III post-crisis reforms[1], banks’ capital and liquidity resources are greater than during the Great Financial Crisis of 2007-09, making them more resilient. The Committee is currently consulting[2] on a set of principles to enhance banks’ operational resilience. Basel Committee members unanimously reaffirmed their expectation of full, timely and consistent implementation of all outstanding Basel III standards based on the revised timeline[3] endorsed by the Group of Governors and Heads of Supervision earlier this year.

The Committee reiterates its previous guidance[4] that banks should make use of the Basel III capital and liquidity buffers during this crisis to absorb financial shocks and to support the real economy by lending to creditworthy households and businesses. Supervisors will allow banks sufficient time to restore buffers, taking account of economic and market conditions as well as the circumstances of individual banks.

The Committee will continue to monitor the risks to the global banking system from Covid-19 and will pursue additional measures if needed. It will also continue to coordinate work on cross-sectoral financial issues with the Financial Stability Board (FSB) and global standard-setting bodies.

In addition to discussing the Covid-19 crisis, the Committee approved the results of the annual assessment exercise for G-SIBs. The results will be submitted to the FSB before it publishes the 2020 list of G-SIBs.

The Committee also approved an updated workplan to evaluate its post-crisis reforms, which will incorporate lessons learned from the Covid-19 crisis. The Committee will conduct a range of empirical analyses to evaluate:

  • the extent to which its post-crisis reforms have achieved their objectives;
  • the interactions among the Basel III reforms and other post-crisis reforms; and
  • whether there are gaps in the regulatory framework or significant unintended effects.

As part of its work, the Committee will continue to seek the views and input of a wide range of stakeholders, including academics, analysts, banks, market participants and the general public.


Note to editors: 

The Basel Committee is the primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. The Committee reports to the Group of Central Bank Governors and Heads of Supervision and seeks its endorsement for major decisions. The Committee does not possess any formal supranational authority, and its decisions do not have legal force. Rather, the Committee relies on its members’ commitments to achieve its mandate. The Basel Committee is chaired by Pablo Hernández de Cos, Governor of the Bank of Spain. More information about the Basel Committee is available here.[5]

References

  1. ^ Basel III post-crisis reforms (www.bis.org)
  2. ^ consulting (www.bis.org)
  3. ^ timeline (www.bis.org)
  4. ^ guidance (www.bis.org)
  5. ^ here (www.bis.org)

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