Basel Committee progress on regulatory reform package

July 15, 2010: the Basel Committee on Banking Supervision reviewed the design and overall calibration of the capital and liquidity frameworks, comments on its December 2009 consultation package, the results of its comprehensive quantitative impact study (QIS) and its economic impact assessment analyses.

Based on this review, the Committee has developed concrete recommendations for completing its package of regulatory reforms. The Basel Committee’s oversight body – the Group of Central Bank Governors and Heads of Supervision – will review the Committee’s progress and recommendations at its upcoming meeting later in July. The Committee will present to the Central Bank Governors and Heads of Supervision concrete recommendations for the definition of capital, the treatment of counterparty credit risk, the leverage ratio, the conservation buffer and the liquidity ratios.

The Committee also reviewed proposals for the role of “gone concern” contingent capital in the regulatory capital framework and will issue shortly a proposal for consultation. It continues to assess proposals on contingent capital from a “going concern” perspective.

Mr Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank, noted that “the Committee made significant progress at its meeting and remains fully on track to deliver a complete package of capital and liquidity reforms, including design and calibration, in time for the November 2010 G20 Leaders Summit in Seoul.”

Committee has issued for consultation a fully fleshed out countercyclical capital buffer proposal. The countercyclical buffer would be imposed when, in the view of national authorities, excess aggregate credit growth is judged to be associated with a build-up of system-wide risk. This will help ensure the banking system has an adequate buffer of capital to protect it against future potential losses. The Committee has already consulted on the capital conservation buffer, which was elaborated in the December 2009 reform package.

The Committee also continues to review specific proposals to address the risks of systemic banking institutions. These include a “guided discretion” approach for a systemic capital surcharge in combination with other mitigating regulatory and supervisory measures.

Comments on the countercyclical buffer proposal should be submitted by Friday 10 September 2010 by e-mail to: Alternatively, comments may be sent by post to the Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland.

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