12 January 2014

BIS: Important steps towards completion of post-crisis regulatory reforms endorsed by GHOS

The GHOS today endorsed proposals from the Basel Committee on a common definition of the leverage ratio, which has been formulated to overcome differences in national accounting frameworks that have previously prevented ready comparison of bank leverage ratios across borders. The fully specified standard will be published by the Committee later today. A globally consistent measure of bank leverage and consistent disclosure standards are central components of the Basel III regulatory framework for internationally active banks. The leverage ratio is intended as a simple non-risk-based "backstop" measure that will reinforce the risk-based capital requirements.

The GHOS also endorsed proposed changes to the Net Stable Funding Ratio, on which the Basel Committee will shortly commence consultation. The NSFR is another important component of the Basel III framework; it complements the Liquidity Coverage Ratio and is designed to promote prudent funding structures by banks, with a particular focus on preventing over-reliance on short-term wholesale funding. At its meeting in January 2013, the GHOS noted that finalising the NSFR should be a priority for the Basel Committee during 2013 and 2014; the start of consultation on the proposed revisions to the NSFR is an important step towards finalising the framework in the year ahead. The Committee intends to release its consultative document shortly.

In relation to disclosure, the GHOS today endorsed Basel Committee proposals regarding minimum requirements for liquidity-related disclosures. The GHOS also endorsed the Committee's intention to publish further guidance on how national authorities can utilise market-based indicators of liquidity within their own frameworks for assessing whether assets qualify as High Quality Liquid Assets (HQLA) under the LCR.

Finally, the GHOS also reviewed and endorsed the Committee's strategic priorities for the next two years. Apart from completing the crisis-related policy reform agenda as a matter of priority, the Committee will focus on three other broad themes: continuing to deepen its programme of monitoring and assessing the implementation of the agreed reforms; further examining the regulatory framework's balance between simplicity, comparability and risk sensitivity; and improving effectiveness of supervision. All of these will involve significant work during 2014 and 2015.

Press release

Annex 1: Summary description of the LCR

Annex 2: Complete set of agreed changes to the Liquidity Coverage Ratio

Full press release

Charter for the Basel Committee

Audio file of the introductory remarks from GHOS Chairman Mervyn King and the Basel Committee on Banking Supervision's Chairman Stefan Ingves as well as the question and answer session which followed.

© BCBS (BIS)