Basel implementation monitoring strategy approved

The group of governors and heads of supervision at the oversight body of the Basel Committee on Banking Supervision have agreed on the strategy for assessing the implementation of Basel III rules around the world.

In a meeting on January 8, 2012, the attendees also discussed the Basel Committee's proposals on the liquidity coverage ratio.

The group fully endorsed the committee's comprehensive approach to monitoring and reviewing implementation of the Basel regulatory framework.

The Basel Committee plans to review the compliance of members' domestic rules or regulations with the international minimum standards in order to identify differences that could raise prudential or level playing field concerns. The committee will also review the measurement of risk-weighted assets to ensure consistency in practice across banks and jurisdictions.

Each Basel Committee member country has committed to undergo a detailed peer review of its implementation of all components of the Basel regulatory framework. In addition to Basel III, the implementation of Basel II and Basel II.5 (the July 2009 enhancements on market risk and resecuritisations,) will also be investigated.

The group of governors and heads of supervision furthermore endorsed the committee's agreement to publish the results of the assessments. The Basel Committee is yet to discuss and define the protocol governing the exact publication of these results. The initial peer reviews will assess implementation in the European Union, Japan and the US, the reviews are expected to commence in the first quarter of 2012.

Stefan Ingves, chairman of the Basel Committee and governor of the Swedish Riksbank, said: "The Committee's rigorous peer review process is a clear signal that effective implementation of the Basel standards is a top priority. Raising the resilience of the global banking system, restoring and maintaining market confidence in regulatory ratios, and providing a level playing field will only be achieved through full, timely and consistent implementation."

The Central Bank of the Philippines on Friday released details of its implementation plans. In a detailed statement, the central bank said the country's universal and commercial banks will be required to adopt the capital adequacy standards under Basel III before January 1, 2014. This puts the Philippines in step with jurisdictions such as China, Australia, Hong Kong and Singapore, which have announced similar Basel III implementation proposals.

With respect to the liquidity coverage ratio, governors and heads of supervision reiterated the central principle that a bank is expected to have a stable funding structure and a stock of high-quality liquid assets that should be available to meet its liquidity needs in times of stress.

The Basel Committee on Banking Supervision provides a forum for regular cooperation on banking supervisory matters. The Committee comprises representatives from Argentina, Australia, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, the UK and the US.

Observers on the Basel Committee are: the European Banking Authority, the European Central Bank, the European Commission, the Financial Stability Institute and the International Monetary Fund.

The group of central bank governors and heads of supervision is the governing body of the Basel Committee and comprises central bank governors and (non-central bank) heads of supervision from member countries.

The Committee's Secretariat is based at the Bank for International Settlements in Basel, Switzerland.