GFMA Submits Comments to the BCBS on Balancing Risk Sensitivity, Simplicity and Comparability
GFMA provides comments to the Basel Committee on Banking Supervision (BCBS) on the Discussion Paper: The Regulatory Framework: Balancing Risk Sensitivity, Simplicity and Comparability.
The Discussion paper steps back from the significant regulatory reforms introduced by the Basel Committee and member jurisdictions to consider the resulting complexity in capital adequacy requirements as well as the comparability of capital adequacy ratios across jurisdictions. The Discussion paper raises important questions about the capital adequacy framework (the Framework) including: whether reliance on risk‐based capital at the core of the Framework appropriately balances varied objectives and the extent to which the framework strikes the right balance between simplicity, comparability, and risk sensitivity.
GFMA believes that while the risk‐based capital framework is not perfect, all elements of it are sound and reflect years of study, practice, and enhancement. Further, GFMA agrees with the Basel Committee that the risk‐based capital framework must continue to evolve, and be updated frequently, to be consistent with changing markets, products, and institutions, and as understanding about how to better reflect risk in regulatory capital improves.