Basel Committee Meets on Market Developments, Risks, and Policy and Supervisory Initiatives

On June 6, 2023, the Basel Committee on Banking Supervision followed up on its meeting in Hong Kong in March and met to further discuss recent financial and market developments, global banking system risks, and policy and supervisory developments. Specifically, the Basel Committee assessed current instabilities surrounding the banking system and the need to strengthen supervisory effectiveness. The Committee confirmed that all aspects of Basel II will be implemented “in full and consistently”. They are reviewing its Basel Core Principles (Core principles for effective banking supervision), and will consult on revisions to the principles with stakeholders by publishing a consultation paper next month.

The Basel Committee highlighted the following points regarding current banking turmoil:

• “The first and most important source of financial and operational resilience comes from banks' own risk management practices and governance arrangements.
• It is critical that supervisors have the ability and willingness to act early and effectively to identify and promptly correct weaknesses in bank practices.
• The Basel III reforms that have been implemented to date helped shield the global banking system and real economy from a more severe banking crisis. Members unanimously reaffirmed their expectation of implementing all aspects of the Basel III framework in a full and consistent manner, and as soon as possible, in order to further enhance the resilience of the global banking system.”

The Committee also discussed prudential treatment of banks’ cryptoassets exposure and potential revisions to existing standard, and climate-related financial risks as it relates to its development of a Pillar 3 framework addressing requirements for disclosure of a bank’s exposure to these risks. The framework will work in tandem with the other authorities such as the ISSB and the Committee will publish a consultation paper by the end of the year. Further, the Basel Committee “reviewed and approved the assessment reports on the United States' implementation of the Net Stable Funding Ratio and large exposures framework” under its Regulatory Consistency Assessment Programme.

More information on the Basel Committee’s June 6^th meeting can be found here.