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.”