Central bank heads signal end of new Basel III initiatives

By:

Colin Marrs

30 Nov 20

Central banks have promised the end of any further changes to the Basel III framework, introduced to manage risks following the global financial crisis of 2007-09.

The announcement was made by the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision.

The group said that its future work will focus on monitoring the implementation and consistency of the framework and carrying out an evaluation of their effectiveness.

A statement from GHOS said: “Any further potential adjustments to Basel III will be limited in nature and consistent with the Committee's evaluation work.”

In addition the group will consider the lessons from Covid-19, and has agreed a coordinated approach to policy responses to the current crisis.

This approach includes:

– monitoring and assessments of vulnerabilities and risks to the global banking system from the pandemic

– Information of supervisory insights gained through the crisie

– Encouraging the use of flexibility embedded in the Basel framework

– monitoring the implementation of temporary adjustments to mitigate risks to the banking system and their unwinding
– “where necessary and prudent”, adopting additional global measures in a coordinated manner.

The GHOS statement said that the Basel III reforms had helped the global banking system enter the crisis with ample capital and liquidity.

It said: “The timely measures pursued by the committee at the start of the pandemic and the GHOS's agreement to revise the implementation timeline for outstanding Basel III standards added to the unprecedented range of fiscal and monetary support measures that have buttressed banks' resilience thus far.

“The Basel III capital and liquidity buffers help banks to absorb shocks and keep lending to creditworthy households and businesses. Using capital and liquidity resources in this way should take priority at present.”

Banks will be given sufficient time to rebuild their buffers once the crisis is over, the statement said.

François Villeroy de Galhau, chairman of the GHOS and governor of the Bank of France, said: "Global cooperation and coordination among central banks and supervisory authorities has been key to maintaining global financial stability during the Covid-19 pandemic and beyond.

"We, as GHOS, affirmed today our commitment to preserving a global level playing field and to avoiding regulatory fragmentation."