On 26 November 2019, the Basel Committee on Banking Supervision (Basel Committee) published a newsletter containing a joint statement with the Basel Consultative Group on the use of proportionality in the implementation of the Basel framework.

In the statement, the Basel Committee states that it supports the use of proportionality in implementing the Basel framework in a manner consistent with the core principles of effective banking supervision.

The Basel Committee explains that proportionality can take different forms, including:

  • implementing the most appropriate approaches among those available in the Basel framework for internationally active banks in member jurisdictions. There is no expectation that internationally active banks must use internally modelled approaches; and
  • implementing standards for banks in non-Basel Committee member jurisdictions that are broadly consistent with the principles of the applicable Basel standards.

The Basel Committee states that a proportionate regulatory framework should reflect the relative differences in risk and complexity across banks and the markets in which they operate. As the Basel framework comprises minimum standards, jurisdictions are free to apply more conservative requirements. The Basel Committee adds that a proportionate framework should also consider supervisory capacity and resources, particularly when implementing more complex standards.