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Monetary and fiscal policy-mix addressing the disease of inflation

22 September 2023
Knowledge Base

Francois Villeroy de Galhau

Let me start with good news about a favourite Eurofi topic: banking regulation and Basel 3. I say it as BIS Chair and former chair of GHOS: we had in Monday an important GHOS meeting in Basel, and we unanimously welcomed the decisive progress made this year in the implementation of Basel 3. By 2025, all jurisdictions – including Europe and – yes – the US – should have implemented it in a broad compliance with the standards. I know each banking industry, on both sides of the Atlantic, tends to consider that the other side has undue advantages. It’s simply not right, and our motto is now straightforward: let us now close this page, and implement the European compromise, no less and no more. No less as some banks would perhaps still dream of, and no more as some theoreticians of regulation would perhaps imagine. And we should now turn to the priority learned from the banking turmoil: “strengthening supervisory effectiveness” [*1] rather than focusing on further regulation. Let me now turn to my theme which is the policy mix to fight our main economic disease: inflation. Continue reading…

Neil Esho: Stick to the Core Principles

18 September 2023
Knowledge Base

On 13 September, Neil Esho, Secretary General of the Basel Committee on Banking Supervision, at the Eurofi Financial Forum 2023, Santiago de Compostela. When asked how he went bankrupt, Mike Campbell, a Scottish war veteran who features in Hemingway’s novel, The Sun Also Rises, responded: “two ways: gradually and then suddenly”. This description of financial failure – clearly not new – is also an apt description that sums up many an episode of banking distress. This includes the failure of a number of US regional banks earlier this year, and the merger of two large Swiss G-SIBs. Continue reading…

Central banks at the crossroads

12 September 2023
Knowledge Base

by Luiz Pereira da Silva,

Central banks, and central bankers, stand at a crossroads. They face not one, but five major forks in the road. In line with their mandate and in addition to their known achievements, central banks, in the 21st century need to reflect carefully on how the new challenges could affect their role. I will list five of these forks: (1) the re-emergence of inflation; (2) climate change; (3) inequality; (4) digital financial innovation; and (5) artificial intelligence. As you know, modern central banks have been successful because they have been capable of strengthening their analytical thinking when facing challenges in the past, balancing risks properly and choosing the best path, even if that path looked challenging. Now, the many consequential issues that we face imply that central banks will have to carefully identify and analyse the paths they mean to tread. Continue reading…

Basel Committee finds the United States largely compliant with its Net Stable Funding Ratio standard

21 July 2023
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The United States’ implementation of the Net Stable Funding Ratio (NSFR) standard and large exposures (LEX) framework are largely compliant with the global standards set by the Basel Committee on Banking Supervision, according to reports published 12 July (NSFR, LEX). The Basel Committee’s assessment reports on the NSFR and LEX form part of its RCAP, a series of reports on the implementation of Basel standards by member jurisdictions of the Basel Committee. Continue reading…

Commission approves the merger between Credit Suisse and UBS

29 May 2023
Knowledge Base

The European Commission has approved unconditionally, under the EU Merger Regulation, the merger between Credit Suisse and UBS. The Commission concluded that the transaction would not raise competition concerns in the European Economic Area (‘EEA’). UBS and Credit Suisse are both global multinational investment banks and financial services companies. In the EEA, the companies’ activities overlap in wealth and asset management as well as in investment banking. Based on its market investigation, the Commission found that the merger would not significantly reduce competition in the markets where their activities overlap within the EEA.
Continue reading…

Where next for the Basel Committee?

02 May 2023
Knowledge Base

by Pablo Hernández de Cos

In many ways, the recent banking turmoil was the first “real” stress test of the banking system (or at least parts of it) since the Great Financial Crisis; as the banking system benefited from the huge scale of public support measures during the Covid-19 pandemic. We can take some comfort that the significant increase in financial resilience, due in large part to the Basel III reforms, has served to safeguard the stability of the global banking system. But we should also recognise that, once again, significant public sector intervention was needed to avoid potentially adverse spillovers to other banks, non-bank financial intermediation (NBFI) entities, and ultimately the real economy. With that in mind, we need to remain focused on assessing and mitigating the risks and vulnerabilities affecting the global banking system. These include elevated debt levels and stretched asset valuations, geopolitical developments, complex and opaque bank interconnections with NBFI entities, and continued uncertainty with regard to economic growth, inflation and interest rate dynamics. Continue reading…

Basel III capital ratios for largest global banks fell to pre-pandemic levels in H1 2022, latest Basel III monitoring exercise shows

14 March 2023
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Basel III capital ratios for a sample of the largest global banks decreased from their record highs in H2 2021 to pre-pandemic levels in H1 2022, according to the latest Basel III monitoring exercise, based on 30 June 2022 data, published on 28 February. The leverage ratio fell on average across all regions, after showing some volatility during the pandemic period. The dividend payout ratio continued its upward trend as banks no longer face restrictions in dividends that member jurisdictions introduced at the onset of the pandemic. The report sets out the impact of the Basel III framework, including the December 2017 finalisation of the Basel III reforms and the January 2019 finalisation of the market risk framework. It covers both Group 1 and Group 2 banks (see note to editors for definitions). Continue reading…

Banking in 2035: Banks face a defining moment

12 October 2022
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As disruptive forces roil today’s financial sector, banking execs are scrutinising the evolving role of banks in the most competitive market they’ve ever faced. What does the future hold? And how can they meet the challenges ahead to forge a brighter future – both for the industry and the greater world? Such is the focus of a new future of banking study, Banking in 2035: three possible futures, by Economist Impact. Continue reading…

BCBS-CPMI-IOSCO finalise analysis of margining practices during the March 2020 market turmoil

07 October 2022
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The Basel Committee on Banking Supervision (BCBS), the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO) (the standard setters) has on September 29 published the report Review of margining practices. The report feeds into the Financial Stability Board’s work programme to enhance the resilience of the non-bank financial intermediation sector. It looks at margin calls during the high market volatility and “dash for cash” in March and April 2020. It also reviews margin practices transparency, predictability and volatility across various jurisdictions and markets, as well as market participants’ preparedness to meet margin calls. Continue reading…

Banks’ risk-based capital ratios remained stable and liquidity ratios improved in H1 2021

24 February 2022
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Banks’ risk-based capital ratios remained stable and liquidity ratios continued to improve in the first half of 2021 even as the pandemic persisted, according to the latest Basel III monitoring results, published on February 21st. The report, published by the Basel Committee on Banking Supervision and based on end-June 2021 data, sets out the impact of the Basel III framework including the December 2017 finalisation of the Basel III reforms and the January 2019 finalisation of the market risk framework. It covers both Group 1 and 2 banks (see note to editors for definitions). Continue reading…