Basel Committee Doubles Down on Basel III Implementation, Risk Management, & Supervisory Tools

In the wake of persistent market uncertainties and last year’s banking sector turmoil, the Basel Committee on Banking Supervision has once again taken a firm stance on global banking resilience. Meeting in Basel on November 19–20, 2024, the committee zeroed in on advancing regulatory consistency, improving risk management practices, and equipping supervisors with sharper tools for navigating the complexities of today’s financial ecosystem.

A decade since its inception, the Basel III framework remains a cornerstone of global financial stability. The committee reaffirmed its expectation for all member jurisdictions to implement the framework “in full, consistently, and as soon as possible.” This isn’t just a box-checking exercise—consistent implementation is key to ensuring a level playing field and addressing cross-border risks.

Compliance professionals can expect continued scrutiny, as the committee’s Regulatory Consistency Assessment Programme reviews jurisdictions' adherence to standards. For example, Korea’s progress on the Net Stable Funding Ratio and large exposures framework will soon be made public, offering insights into what regulators worldwide may focus on next.

The 2023 turmoil exposed cracks in banks' counterparty credit risk management, particularly in their dealings with non-bank financial intermediaries (NBFIs). The Basel Committee responded with finalized guidelines aimed at addressing these vulnerabilities, set to be published next month.

For risk managers, this is a wake-up call. Banks’ growing interconnections with NBFIs—through lending, investment, and operational dependencies—can create hidden risks. Adding to the challenge, data gaps often obscure the full picture. The new guidelines will push institutions to better measure, monitor, and mitigate these risks, urging risk teams to sharpen their vigilance and reporting frameworks.

Supervisory Tools: From Theory to Practice

Supervisory lapses during last year’s banking crisis underscored the need for a more practical, hands-on approach. The Basel Committee is now rolling out a suite of tools to help supervisors tackle liquidity risks, interest rate risks, and business model viability more effectively.

For compliance teams, this signals a shift toward more granular, judgment-based supervision. Regulators will be looking not just at quantitative metrics but also at the qualitative sustainability of business strategies. These efforts aim to prevent the next crisis before it starts—an endeavor that will demand closer collaboration between institutions and their regulators.

The meeting wasn’t all about immediate crises. The committee also:

• Advanced climate risk disclosures under Pillar 3, aiming for finalization in mid-2025.
• Examined macroprudential policies, including the countercyclical capital buffer, to guide jurisdictions seeking to adopt a cycle-neutral rate—a concept risk professionals should keep on their radar.
• Continued work on addressing “window-dressing” practices by global systemically important banks (G-SIBs), signaling an ongoing focus on ethical conduct and transparency.

What’s Next for Compliance & Risk Leaders?

For professionals in the compliance and risk trenches, the Basel Committee’s latest moves are a reminder that regulatory expectations are not static—they’re evolving. Erik Thedéen, the committee’s chair, summed it up best, “Strengthening regulatory and supervisory frameworks isn’t just about avoiding the next crisis; it’s about building a system that can withstand whatever comes next.”

Now is the time to revisit your institution’s risk assessments, strengthen counterparty credit controls, and engage proactively with supervisors. With Basel III’s full implementation on the horizon and a sharper regulatory lens on the way, staying ahead of these changes will be critical for building resilience in an unpredictable financial landscape.

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