The Basel Committee met to discuss the impact to date of the coronavirus disease (Covid-19) pandemic on the global banking system.
The Committee noted that the measures taken to date at the onset of the pandemic have helped mitigate some of the short-term financial stability risks. All members reaffirmed their expectation of full, timely and consistent implementation of all Basel III standards based on the revised timeline endorsed by the Group of Governors and Heads of Supervision.
The Committee noted that the pandemic has entered a new phase and that the impact and response vary across jurisdictions and the global economic outlook remains uncertain. Banks and supervisors must remain vigilant to the risks and vulnerabilities stemming from the pandemic to ensure that the global banking system remains financially and operationally resilient.
They noted that the Basel III Framework includes capital buffers designed to absorb losses in times of stress and to help maintain the flow of credit to the real economy. Using these capital resources to support the real economy and absorb losses should take a priority during the crisis.
Additionally, the Committee approved two measures that were commented on by WOCCU during the consultation process as follows:
- final revisions to the credit valuation adjustment risk framework, which will be published in the coming weeks; and
- a technical amendment on the prudential treatment of non-performing loan securitisations, which will be published for consultation next week.
Members also took stock of banks' progress on benchmark rate reforms and discussed potential regulatory implications stemming from banks' transition to alternative reference rates. The Committee places high priority on this issue and expects all banks to be adequately prepared to meet the transition timeline.
The Committee also reviewed the responses received to its discussion paper on the prudential treatment for crypto-assets and approved a workplan for the next phase of the work, with a view to future consultation.
A copy of the press release can be viewed here.