The Basel Committee will regulate banks’ exposure to crypto assets

It will also mark the information requirements for entities regarding market risk and sovereign exposures.

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The Basel Committee on Banking Supervision It plans to agree on a regulatory framework that will govern banks’ exposures to crypto assets, according to its work program for 2021 and 2022, published this Friday by the entity.

Between this year and next, the Committee plans to “finalize current initiatives related to risk mitigation and structural trends such as the prudential treatment of banks’ exposures to crypto assets.”

Like other regulators and central banks in different countries, the Basel Committee qualifies cryptocurrencies as crypto assets because, in its opinion, they do not meet the requirements and functions to be treated as money.

Sovereign risk

The regulatory framework will also set the information requirements for banks with respect to market risk and sovereign exposures. This initiative is part of one of the three lines of work that the Committee has set itself for these two years: identifying, assessing and mitigating risks and vulnerabilities in the banking system.

In addition to crypto assets, the agency will also monitor other risks such as the impact of digitization and financial disintermediation, climate change and the impact of a longer low interest rate environment.

The Committee has emphasized that In the next two years, all the necessary work will be carried out for the definitive implementation of the Basel III regulatory framework..

“It is critical that all jurisdictions implement the current Basel III standards consistently, on time and in full. Our strategic priorities are ambitious and seek to ensure that the Committee continues to promote global financial stability and safeguard the safety and soundness of banks worldwide ”, underlined the Chairman of the Basel Committee on Banking Supervision, as well as Governor of the Bank of Spain , Pablo Hernández de Cos.

Pandemic

The second line of work of the Basel Committee will be resilience against Covid-19 and economic recovery from the crisis. Thus, the risks and vulnerabilities arising from the pandemic and, if necessary, new regulatory responses will be developed and deployed to support the banking system and mitigate risks.

In this context, the Committee has reported that it will monitor the implementation and gradual reduction of the measures adopted by the different countries to support banks. Likewise, it has indicated that it is preparing a report that includes the “learned lessons” with respect to the Basel III standards. The document will be finalized in the summer of 2021 and will form part of the report that the Financial Stability Board sends to the G20.

The third line of work for 2021-2022 is that of “strengthen” coordination and supervision practices between the different agencies. Key areas of time will include the use of artificial intelligence in supervisory activity, data and technology governance by banks, and supervisory approaches to operational resilience, especially in the area of cybersecurity.