Basel Committee Finalises Market Risk Framework
This week the Group of Central Bank Governors and Heads of Supervision (GHOS) endorsed the Basel Committee for Banking Supervision’s (BCBS) final revisions to the minimum capital requirements for the market risk standard. The newly approved market framework will come into effect on 1 January 2022.
The minimum capital requirement framework in this area exists to ensure that banks have a minimum level of regulatory capital to absorb any losses in the case of unexpected market movements and distress. The 2008 financial crisis revealed that the legacy framework was not high enough to withstand serious market distress, and so a new, more robust framework was developed.
The standard has been through two revisions since then, in 2009 and 2016. This latest revision keeps the core features of the standard but makes revisions in light of market experience since 2016.