Basel Committee to Revisit Bank Crypto Guidelines

Following pushback from financial markets industry associations, the Basel Committee says it will “further specify a proposed prudential treatment, with a view to issuing a further consultative document by mid-2022”.

In the original proposal the Committee suggested banks would have to allocate capital at 100% of their cryptoasset exposures, much higher than in traditional asset classes and something that was seen as representing a barrier to entry for banks. Having reviewed the response to its consultation, the Committee is now likely to revisit the issue, however a significant shift to the industry’s position may not be forthcoming, as in a release the Basel Committee also observes, “Members reiterated the importance of developing a conservative risk-based global minimum standard to mitigate prospective risks from cryptoassets to the banking system, consistent with the general principles set out in the consultative document.”

The news came in a release from the Basel Committee on its workplan, also of note in the release was an agreement to proceed with its proposed approach to replacing the existing  G-SIB (Globally Systemically Important Banks) three-year review cycle with a process of ongoing monitoring and review. This will ensure that it remains appropriate over time, the Committee says, adding, in the near term, it will review the implications of developments related to the European Banking Union for the G-SIB methodology. In particular, this will include a targeted review of the treatment of cross-border exposures within the Banking Union on the G-SIB methodology.

The Committee also agreed to consult later in November on a set of principles for the effective management and supervision of climate-related financial risks at internationally active banks.