Understanding Basel III, What Is Different After October 2014
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Understanding Basel III, What Is Different After October 2014
Today we will start with something interesting: Who is really implementing Basel III and to what extent?
Seventh progress report on adoption of the Basel regulatory framework
October 2014
Introduction
This report sets out the adoption status of Basel II, Basel 2.5 and Basel III regulations for each Basel Committee member jurisdiction as of end-September 2014.
It updates the Committee’s previous progress reports, which have been published on a semiannual basis since October 2011.
In 2012, the Basel Committee started the Regulatory Consistency Assessment Programme (RCAP) to monitor progress in introducing regulations, assess their consistency and analyse regulatory outcomes.
As part of this programme, the Committee periodically monitors the adoption status of the risk-based capital requirements (since October 2011) and the requirements for global and domestic systemically important banks, the liquidity coverage ratio (LCR) and the leverage ratio (since October 2013).
Regarding the consistency of implementation, the Committee has published its assessment reports on seven members (Australia, Brazil, Canada, China, Japan, Singapore and Switzerland) regarding their implementation of Basel III risk-based capital regulations, which are available on its website.
Consistency assessments of the European Union and the United States are currently being concluded.
The assessments of Hong Kong SAR, India, Mexico and South Africa have begun, and include consistency of implementation of both risk-based capital standards and the Basel III LCR standards.
By early 2015, the Committee will have assessed the consistency of risk-based capital standards adopted by 19 of its 27 member jurisdictions and all members who are home jurisdictions for global systemically important banks (G-SIBs).
Regarding the analysis of regulatory outcomes, the Committee has conducted additional analytical work on risk-weighted asset (RWA) variation in the banking and trading books, which is envisaged to be published during the first half of 2015.
In addition, measures to address excessive variation are under development, and the Basel Committee expects to publish its progress later this year.
The Committee is also considering a proposal for ongoing monitoring of RWA variation from 2015.
Status of adoption of Basel III standards
Scope
The Basel III framework builds on and enhances the regulatory framework set out under Basel II and Basel 2.5.
The table attached therefore reviews members’ regulatory adoption of Basel II, Basel 2.5 and Basel III.
• Basel II: Basel II, which improved the measurement of credit risk and included capture of operational risk, was released in 2004 and was due to be implemented from year-end 2006.
The Framework consists of three pillars: Pillar 1 contains the minimum capital requirements; Pillar 2 sets out the supervisory review process; and Pillar 3 corresponds to market discipline.
• Basel 2.5: Basel 2.5, agreed in July 2009, enhanced the measurements of risks related to securitisation and trading book exposures. Basel 2.5 was due to be implemented no later than 31 December 2011.
• Basel III: In December 2010, the Committee released Basel III, which set higher levels for capital requirements and introduced a new global liquidity framework.
Committee members agreed to implement Basel III from 1 January 2013, subject to transitional and phase-in arrangements.
• G-SIB framework: In July 2013, the Committee published the framework on the assessment methodology for global systemic importance and the magnitude of additional loss absorbency that global systemically important banks (G-SIBs) should have.
The requirements will be introduced on 1 January 2016 and become fully effective on 1 January 2019.
To enable their timely implementation, national jurisdictions agreed to implement by 1 January 2014 the official regulations/legislations that ...
