Nei Schilling Zelmanovitsnei, a partner at Brazilian law firm Machado Meyer, reviews the changes to financial sector regulation in Brazil since the financial crisis. He focuses on the implementation of the Basel 3 capital standards, anti-money laundering rules, and suitability requirements. The piece was published in the latest issue of Global Banking & Financial Policy Review.
The Basel Committee’s governing body has endorsed Basel 3’s new market risk framework and leverage ratio requirements.
“Notable improvements in the new risk framework, which takes effect in 2019, include:
– A revised boundary between the banking and trading books that will reduce scope for arbitrage;
– A revised internal models approach with more coherent and comprehensive risk capture;
– An enhanced model approval process and more prudent recognition of hedging and portfolio diversification; and
– A revised standardised approach that serves as a credible fall-back and floor to the model-based approach, and facilitates more consistent and comparable reporting of market risk across banks and jurisdictions.
The [Group of Central Bank Governors and Heads of Supervision (GHOS)] also discussed the final design and calibration of the leverage ratio. Members agreed that the leverage ratio should be based on a Tier 1 definition of capital and should comprise a minimum level of 3%, and they discussed additional requirements for global systemically important banks.”