Bank regulators seek crypto capital rules by year’s end

Global banking regulators are calling for a regulatory framework for banks’ crypto exposures by the end of the year.

Following a meeting of the Group of Central Bank Governors and Heads of Supervision (GHOS), which oversees the Basel Committee on Banking Supervision, the regulators reiterated their commitment to implementing the post-financial crisis reforms (known as Basel III), as quickly as possible amid growing financial stability risks.

“The resurgence of inflation in many jurisdictions, coupled with a deteriorating macroeconomic outlook and tighter financial conditions, may expose vulnerabilities accumulated in the financial system,” the GHOS said in a release.

“The unwinding of public support measures — which were critical in shielding banks from losses over the past two years — places greater importance on the resilience of the banking sector to absorb potential shocks,” it added.

The group noted that more than two-thirds of jurisdictions plan to implement most of the revised standards in 2023 or 2024, and the rest of the markets are planning to implement Basel III in 2025.

The GHOS, which is currently chaired by Bank of Canada Governor Tiff Macklem, also highlighted regulators’ work on both climate-related risks and banks’ crypto exposures.

On crypto, the group called on the Basel Committee to finalize a regulatory framework for banks’ crypto exposures that “promotes responsible innovation while preserving financial stability” by the end of the year.

In mid-August, the Office of the Superintendent of Financial Institutions (OSFI) issued an advisory setting out its planned approach to cryptoassets at banks and insurers, which is slated to take effect in the second quarter of 2023.

Among other things, OSFI’s approach prohibits short positions in crypto and imposes strict capital requirements for most crypto exposures.

On climate, the GHOS also endorsed the Basel Committee’s approach to developing potential disclosure and supervisory standards.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.