Press release

Press enquiries: +41 61 280 8188
press@bis.org
www.bis.org
Ref no: 44/2010
19 October 2010

The Basel Committee announces progress in finalising its
reform programme and releases report to the G20 on response
to the financial crisis
The Basel Committee on Banking Supervision met today in Seoul, South Korea, to
work towards finalising its reform programme.
The Committee agreed on key details of the liquidity coverage ratio (LCR). It
confirmed that both the LCR and the net stable funding ratio will be subject to an
observation period and will include a review clause to address any unintended
consequences. It also reviewed public comments received on its August 2010
Proposal to ensure the loss absorbency of regulatory capital at the point of nonviability and agreed to finalise the proposal by year end. Finally, the Committee
agreed to release its report Calibrating regulatory minimum capital requirements
and capital buffers: a top-down approach. The Committee will issue by year end
detailed rules text setting out all elements of the standards for both the capital and
liquidity requirements.
At the conclusion of today’s meeting, the Basel Committee also published a report
on its comprehensive regulatory reform programme to address the lessons of the
crisis. The report was prepared for the G20 Finance Ministers and Central Bank
Governors meeting in Gyeongju, South Korea on 22-23 October.
The Basel Committee’s response to the financial crisis: report to the G20
describes the measures taken by the Committee and its governing body of Central
Bank Governors and Heads of Supervision to strengthen the resilience of banks
and the global banking system. Mr Nout Wellink, Chairman of the Basel
Committee on Banking Supervision and President of the Netherlands Bank, noted
that “the Basel Committee reforms address the identified weaknesses of the precrisis banking sector, thus delivering on the G20 mandate given at the Pittsburgh
summit to develop a more resilient banking sector”. Mr Wellink introduced the
Committee’s G20 report at the conclusion of today’s meeting in Seoul that was
hosted by the Bank of Korea and Korea’s Financial Supervisory Service. He
expressed his gratitude for “the strong Korean leadership of the G20, which has

been critical to maintaining the Committee’s momentum in completing its
comprehensive package in a timely manner”.
The new global standards to address both firm-specific and broader, systemic
risks have been referred to as “Basel III”. Basel III is comprised of the following
building blocks, which were agreed and issued by the Committee and its
governing body between July 2009 and September 2010:
•

higher quality of capital, with a focus on common equity, and higher levels
of capital to ensure banks can better absorb the types of losses like those
associated with this past crisis;

•

better coverage of risk, especially for capital market activities;

•

an internationally harmonised leverage ratio to constrain excessive risk
taking and to serve as a backstop to the risk-based capital measure, with
a view to migrating to a Pillar 1 treatment based on appropriate review
and calibration;

•

capital buffers, which should be built up in good times so that they can be
drawn down in periods of stress;

•

minimum global liquidity standards to improve banks’ resilience to acute
short term stress and to improve longer term funding; and

•

stronger standards
management.

for

supervision,

public

disclosures

and

risk

The Basel Committee is also contributing to the Financial Stability Board initiative
to address the risks of globally systemic banking institutions by developing
approaches to identify them and ways to raise their loss absorbing capacity,
including work on capital surcharges, contingent capital, and bail-in-able debt.
Mr Wellink added that “higher levels of capital, combined with a global liquidity
framework and more rigorous supervision will substantially reduce the probability
and severity of banking crises in the future. This helps safeguard financial stability
and economic growth and reduces the exposure to the public sector and
taxpayers.”
**********
The Basel Committee on Banking Supervision provides a forum for regular
cooperation on banking supervisory matters. It seeks to promote and strengthen
supervisory and risk management practices globally. The Committee comprises
representatives from Argentina, Australia, Belgium, Brazil, Canada, China, France,
Germany, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Luxembourg,
Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, Spain,
Sweden, Switzerland, Turkey, the United Kingdom and the United States.
The Group of Central Bank Governors and Heads of Supervision is the
governing body of the Basel Committee and is comprised of central bank
governors and (non-central bank) heads of supervision from member countries.
The Committee’s Secretariat is based at the Bank for International Settlements in
Basel, Switzerland.