Basel Committee to Consult on Crypto asset and Interest Rate Risk Standards, Address G-SIB Framework Concerns

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The Basel Committee on Banking Supervision has announced key decisions and initiatives following its recent meeting. The committee agreed to consult on targeted revisions to the prudential standard for banks’ exposures to cryptoassets. This includes potential adjustments to the criteria for stablecoins to receive preferential regulatory treatment. Additionally, the committee will consider technical amendments to ensure a consistent understanding of the standard. While permissionless blockchain-based cryptoassets pose unmitigated risks, the existing treatment for such assets will be maintained. The consultation paper on these matters will be published this month.

Furthermore, the committee will consult on targeted adjustments to its standard on interest rate risk in the banking book (IRRBB). These adjustments are based on a review initiated as part of the committee’s 2023–24 work program. The proposed updates to interest rate shocks aim to account for movements since the standard’s initial publication in April 2016.

Addressing concerns related to global systemically important banks (G-SIBs), the committee discussed empirical studies highlighting “window-dressing” behavior by some banks. Such behavior seeks to temporarily reduce banks’ perceived risk profile during the reporting and public disclosure of G-SIB scores. The committee, emphasizing that window-dressing is unacceptable, will consult in 2024 on potential policy options to mitigate such behavior. Higher-frequency data collection will inform this effort.

In the realm of climate-related financial risks, the committee discussed risk management considerations associated with transitioning to a low-carbon economy and related physical risks. These considerations will be developed further over the coming months, complementing the committee’s holistic approach to addressing climate-related financial risks.

The committee also reviewed and approved assessment reports on the implementation of Basel III reforms, including the Net Stable Funding Ratio, large exposures framework, and Liquidity Coverage Ratio by Mexico and Switzerland. These reports will be published this month as part of the Regulatory Consistency Assessment Programme.