The Bank for International Settlements has published a speech given by Stefan Ingves, Chairman of the Basel Committee on Banking Supervision (Basel Committee). The speech is entitled Reflections of a Basel Committee Chairman and includes high level comments regarding the finalisation of the Basel Committee’s post-crisis reforms.

At a high level this includes:

  • a revised standardised approach to credit risk. This will be more risk-sensitive than the current standardised approach and more consistent with the internal model-based approaches. It will also be neutral in terms of its capital impact;
  • the revised framework will largely retain the use of internal models but with the safeguards provided by input floors and revisions to the foundation internal ratings based approach;
  • a revised standardised approach for operational risk will replace the four existing approaches, including the Advanced Measurement Approach, which is based on banks’ internal models. Mr. Ingves expects this to be capital-neutral but notes that there will no doubt be increases and decreases in operational risk capital requirements for certain banks;
  • a leverage ratio surcharge for global systemically important banks (G-SIBs) will be introduced to complement the risk-based G-SIB surcharge; and
  • Mr. Ingves expects that an aggregate output floor will be part of the package of reforms. It will be based on the standardised approaches and the final calibration of the floor is subject to endorsement by the GHOS.

Mr. Ingves also mentions that a lengthy implementation and phase-in period is likely to be part of the package.

View BCBS speech on progress of revisions to Basel III, 30 November 2016