Basel Committee Chairman expects capital floors and a G-SIB Leverage Ratio surcharge
Reflections of a Basel Committee Chairman
Keynote address by Mr Stefan Ingves, Chairman of the Basel Committee and Governor of Sveriges Riksbank, at the 19th International Conference of Banking Supervisors, Santiago, 30 November 2016.
Section 2 – Finalising post-crisis reforms
Let me now turn to the issue of the finalisation of the Committee’s post-crisis reforms. As you know, the Committee has spent the past two days working towards an agreement to finalise these post-crisis reforms. We have made very good progress and the contours of an agreement are now clear. At a high level this includes:
A revised standardised approach to credit risk. This will be more risk-sensitive than the current standardised approach and more consistent with the internal model-based approaches. It will also be neutral in terms of its capital impact;
The revised framework will largely retain the use of internal models but with the safeguards provided by input floors and revisions to the foundation IRB approach;
A revised standardised approach for operational risk will replace the four existing approaches, including the Advanced Measurement Approach, which is based on banks’ internal models. I expect this will also be capital-neutral overall, but there will no doubt be increases and decreases in operational risk capital requirements for certain banks;
A leverage ratio surcharge for global systemically important banks will be introduced to complement the risk-based G-SIB surcharge;
Finally, I expect an aggregate output floor will be part of our package of reforms. It will be based on the standardised approaches and the final calibration of the floor is subject to endorsement by the GHOS.
It is important to note that a lengthy implementation and phase-in period is likely to be part of this package. This would allow for banks to migrate to the new framework in an orderly and manageable fashion.
The full speech is available here.
March 3, 2017
August 29, 2016
November 5, 2015