Basel III End Game

The Basel Committee on Banking Supervision (BCBS) announced on December 7th that an agreement was reached
on the finalisation of the Basel III post-crisis framework. Among the pieces that were approved, the calibration of the
output capital floor was the most significant pending element and the main focus of negotiations among members of
the Committee. New standards are set to be implemented by January 2022. Additionally the group of Governors and
Head of Supervision (GHOS) stated that more time was provided for the review of the market risk framework (January 2022) and that no consensus was reached on the treatment of sovereign risk. These announcements will help bring clarity to the banking regulatory framework. Some stability in regulation can now be expected.
After several years of work aimed at increasing simplicity, risk sensitivity and comparability of capital ratios, the BCBS has finally reached an agreement on the pending issues of the finalisation of the Basel III framework, the so-called Basel IV. The GHOS has endorsed the agreement, which ends the design phase of the global regulatory agenda.
Now it is time for the implementation of these remaining issues. Together with the announcement of the finalisation of this package, it was also announced that after nearly 3 years, no consensus was reached in the Committee regarding potential changes to the treatment of sovereign exposures. This is based on the lack of will of a majority of the member states to introduce changes for now. Nevertheless, the Committee has issued a discussion paper with views to serve as technical input for future discussions.

Fuente: BBVA Research

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