Regulation Around the World: Basel 3.1 implementation

In 2017, the Basel Committee on Banking Supervision finalised the last major piece of its post crisis reforms, often referred to as Basel 3.1. These reforms introduced updated standards for calculating capital requirements for credit risk, credit valuation adjustment (CVA) risk and operational risk. They also set out a revised leverage ratio, a leverage ratio buffer for global systemically important banks, and an “output floor” based on strengthened standardised approaches, which limits how far internal models can reduce risk based capital requirements.

A central aim of these changes is to curb the excessive variability of risk weighted assets (RWAs). During the global financial crisis, confidence in reported risk weighted capital ratios eroded among investors, supervisors and other stakeholders. The revisions are designed to restore credibility by making the standardised approaches for credit and operational risk more robust and risk sensitive, tightening the use of internal models, and reinforcing the risk based framework with a stronger leverage ratio and a binding output floor.

1. Is your jurisdiction intending to implement the final Basel 3.1 standards and, if so, what papers have so far been published?
2. What is your jurisdiction proposing as regards scope and application?
3. Can you describe some of the key aspects of your jurisdiction’s approach to the revised standardised approaches including the market risk framework and credit risk mitigation?
4. How is your jurisdiction approaching the operational risk framework?
5. How is your jurisdiction approaching the output floor?
6. How is your jurisdiction implementing the leverage ratio framework?
7. What proposals have been made regarding enhanced disclosure (Pillar 3)?
8. What is your jurisdiction’s timing concerning the implementation of the final Basel 3.1 standards?

In addition, for the European jurisdictions we added one further topical question outside of Basel 3.1 which asks for an update regarding the implementation of the Capital Requirements Directive VI’s supervisory framework for branches of third-countries.

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