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Basel III implementation and update on cryptoasset standard

01 July 2024
Knowledge Base

The Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, met recently. The GHOS took stock of the implementation status of the outstanding Basel III reforms, which were finalised in 2017. Members have continued to make good progress with implementation. Around two thirds of member jurisdictions will have implemented all, or the majority, of the standards by this year, with the remaining jurisdictions planning on doing so by next year. Continue reading…

Basel Committee publishes report on the digitalisation of finance

21 May 2024

The Basel Committee on Banking Supervision has on 16 May published a report that considers the implications of the ongoing digitalisation of finance on banks and supervision. The report builds on the Sound Practices: implications of fintech developments for banks and bank supervisors published in 2018, and takes stock of recent developments in the digitalisation of finance. Continue reading…

Photo: El Gobernador del Banco de España, Pablo Hernandez de Cos, en Madrid el 15 de Enero de 2019.

Meeting International Supervisory Community: Challenges ahead for Global Bank Supervision and Regulation

10 May 2024
Knowledge Base

Over 220 central bankers and banking supervisors representing more than 90 jurisdictions met on 24–25 April in Basel for the 23rd International Conference of Banking Supervisors (ICBS). The ICBS included a programme to celebrate the 50th anniversary of the Basel Committee on Banking Supervision. Delegates took the opportunity to reflect on the Committee’s achievements over the past half century, the outlook for banks and supervisors, and the implications for the Committee’s future work. Continue reading…

Project Helvetia III – The Swiss National Bank’s pilot for wholesale CBDC

07 May 2024
Knowledge Base

by Thomas J. Jordan

It is a great pleasure to give you some insights into this pilot project of the Swiss National Bank. The pilot represents the world’s first issuance of a wholesale CBDC on a regulated third-party platform to settle commercial transactions with tokenised assets. Helvetia III is a good example of how learnings from BIS Innovation Hub projects can be leveraged for real world use. We started this work together with the Hub’s Swiss Centre and the private sector more than four years ago. In Helvetia I and II, we jointly expanded our understanding of wholesale CBDC and shared the findings with the central bank community. We took advantage of this groundwork to launch Helvetia III in December 2023, bringing Swiss franc wholesale CBDC from a test setting to real use. Continue reading…

Financial stability risks and the FSB’s work program

03 May 2024
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by Klaas Knot

What was on our minds when we last met in December 2022? At that time, we had just seen the sharpest tightening of financial conditions since the 2008 global financial crisis. We had concerns about elevated debt levels and interconnectedness between banks and non-bank financial intermediaries amid high inflation and a deteriorating growth outlook. In this context, I emphasized that financial stability could not be taken for granted. So where are we today? Well, these concerns have not vanished; they continue to shape large parts of the FSB’s work. While inflation has somewhat eased, there is still some uncertainty about the persistence of inflation. What’s more, market valuations remain elevated. The tight spreads and low volatility in corporate bond markets are hard to square with rising defaults and upcoming higher refinancing costs. Similarly, equity valuations appear stretched.
Continue reading…

Basel Committee: Consultation on guidelines for counterparty credit risk management

01 May 2024
Knowledge Base

Basel Committee has published a consultation on guidelines for counterparty credit risk management. The proposed guidelines include key practices critical to resolving long-standing industry weaknesses in counterparty credit risk management. The Basel Committee on Banking Supervision issued a consultative document on guidelines for counterparty credit risk (CCR) management. The proposed guidelines will replace the Committee’s Sound practices for banks’ interactions with highly leveraged institutions published in January 1999. Continue reading…

Central Bank Capital: Of capital importance?

18 April 2024
Knowledge Base

by Klaas Knot

Transparency should be a guiding principle for central banks. They should be prepared to discuss their monetary policy decisions and clearly explain how their decisions safeguard price stability, and also not shy away from considering any link with public finances and the real economy. Equally, they should communicate proactively and not refrain from being transparent about the potential impact of their decisions on their balance sheets and, as such, emphasise their crucial role in absorbing losses in times of crises. Central banks around the world are going through some pretty turbulent times these days. With huge losses. And the Dutch central bank is no exception. The last time the Dutch central bank faced a similar turbulent situation was roughly a century ago, in 1931 to be exact. The turbulent times that caused significant losses back then, had to do with the gold standard. Continue reading…

ECB and EBA step up efforts to make banking industry data reporting more efficient

12 April 2024
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The European Central Bank (ECB) and the European Banking Authority (EBA) aim to harmonise and integrate data reporting by the banking industry with the goal of improving efficiency and reducing the associated costs. To this end, the two institutions have on 18 March established the Joint Bank Reporting Committee (JBRC), which is tasked with helping to develop common definitions and standards for the data that banks are required to report for statistical, supervisory and resolution purposes. Continue reading…

Photo: Yannis Stournaras

Lessons learnt from the experience of lasting zero interest rates and non-standard monetary policy measures

09 April 2024
Knowledge Base

by Yannis Stournaras

Central bankers have encountered significant challenges over the past 15 years: a global financial turmoil, the euro area sovereign debt crisis, a prolonged period of very-low inflation, the pandemic, and the outbreak of geopolitical crises along with a series of supply-side shocks. Each of these developments has impacted on inflation and economic activity. Each has done so in a different way. In the following remarks, I argue that the monetary policy measures adopted by the ECB during that period — including the lowering of the policy rate to negative levels for a period of 8 years — managed to support a sustained progress towards price stability, ensuring at the same time financial stability, and supporting economic welfare. That said, there were difficult trade-offs to manage. Over time, low rates and non-standard monetary policy measures may lead to excessive leverage and cause short-term dislocations in financial markets. In addition, as we have recently seen, a pivot in the monetary policy stance to combat higher inflation, can cause losses to central banks because they have to remunerate their liabilities at higher interest rates, while their assets have locked in low yields. Do these losses impair the ability of central banks to apply their preferred monetary policy rules? Do they compromise their independence? I argue they do not.
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Basel Committee agrees to consult on targeted revisions to standards on cryptoasset and interest rate risk in the banking book

20 December 2023
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The Basel Committee on Banking Supervision met virtually  to discuss a range of policy and supervisory initiatives. The Committee took stock of its review of various elements of the prudential standard for banks’ exposures to cryptoassets published in December 2022. It agreed to consult on potential targeted revisions related to the criteria for stablecoins to receive a preferential “Group 1b” regulatory treatment. The Committee will also consult on various technical amendments to help promote a consistent understanding of the standard. The Committee concluded that cryptoassets that use permissionless blockchains create risks that cannot be sufficiently mitigated at present and therefore agreed to retain the existing treatment for such cryptoassets. The consultation paper will be published this month. Continue reading…