Ingves: The Basel Committee gives priority to risk-weighted assets in the final phase of the Basel III regulatory framework
Much of the work on Basel III has been completed, although outstanding regulations still need to be finalised. The various regulations must also be calibrated and analysed together in order to gain a better understanding of their overall effect. An integral part of this work is to reduce unwanted variability in the way risk-weighted assets are calculated.
The Governor of the Riksbank, Stefan Ingves, spoke about this process when he, in his role as Chairman of the Basel Committee on Banking Supervision (BCBS), participated in a conference arranged by the Institute of International Finance (IIF) in conjunction with the annual meetings of the International Monetary Fund (IMF) and the World Bank in Lima, Peru, on 9 October 2015.
The Basel Committee's work programme is now focusing on finalising outstanding reforms and finding a good balance between simplicity, risk sensitivity and comparability in the capital adequacy regulations. Work over the next year will include:
- enhancing the comparability between the calculations of risk-weighted assets using the banks' internal models,
- drafting proposals for the final design of the standard methods for credit risk and operational risk, and,
- finalising the standard for market risk
He also noted that certain adjustments to the regulatory framework may still be needed, since the Basel Committee still has to consider both external comments on the more important policy proposals and the results of the quantitative impact analyses. Furthermore, calibration consists of a number of key parts, such as the leverage ratio requirement.
"Although I have not touched upon it in my remarks today, the Committee will also be in a position around the end of this year to articulate the outcome of its strategic review of the capital framework. This will provide further clarity on how the Committee intends to address the issue of excessive variability in risk-weighted assets." Mr Ingves concluded.
