The Basel Committee on Banking Supervision today issued a revision to the minimum capital requirements for market risks which is available for public consultation. Improvements to the capital requirements for trading activities are a key component of the Committee’s duty of reforming global regulatory standards in view of the latest global financial crisis.
The proposed changes include:
- changes to the measurement of the standardised approach to enhance its risk sensitivity (including changes to FX risk);
- recalibration of standardised approach risk weights applicable to general interest rate risk, FX risk and equity risk;
- revisions to the assessment process to determine whether a bank’s internal risk management models appropriately reflect the risks of individual trading desks;
- identification of risk factors eligible for internal modelling are better clearified;
- exposures subject to market risk capital requirements are thoroughly redefined.
The consultative document also proposes a recalibration of the Basel II standardized approach for banks with less material risk exposure. These proposals follow the decision by the Group of Governors and Heads of Supervision to extend the implementation date of the market risk standard to 1 January 2022, to give banks additional time to develop systems infrastructure and for the Committee to address certain aspects of the framework.
The Committee plans to finalise any revisions to the market risk standard as soon as possible to allow enough time for national implementation and for banks to develop the necessary infrastructure. The proposed revisions are designed to support smooth implementation of the standard.