Basel Committee's attention turns to better interaction of regulatory settings

With the major elements of the post-financial crisis reform agenda largely settled, the Basel Committee on Banking Supervision will turn its attention this year to an assessment of the interaction, coherence and overall calibration of its reform policies.

The Basel Committee issued its 2015 work program on Friday, saying its aim was to consider how the various elements interact and whether they are consistent with their objectives.

The pre-crisis regulatory framework relied on the risk-weighted capital ratio as the main metric. "The framework now includes a leverage ratio, exposure limits, liquidity coverage ratio, net stable funding ratio and loss-absorbing capacity for G-SIBs and D-SIBs," the Committee said.

In other areas, the Committee said its work on restoring confidence in bank capital ratios would include revisions to existing methods of measuring risk-weighted assets, a capital floor based on standardised approaches, comparable criteria for securitisations and the adequacy of the loss-absorbing capacity of global systemically important banks.

The Committee is also reviewing the regulatory treatment of sovereign risk and the role of stress testing in the regulatory framework.

It will look at current approaches to stress testing in different countries. It said stress testing had become increasingly important, both as a regulatory tool and as a method for determining bank capital requirements.

The committee said it would continue its work on improving the effectiveness of supervision, especially around stress testing and valuation practices.