The Basel Committee on Banking Supervision published its work program for 2015 and 2016. The program is based around four themes: (i) policy development; (ii) the balance between simplicity, comparability and risk sensitivity across the regulatory framework; (iii) monitoring and assessing implementation of the Basel framework; and (iv) improving the effectiveness of supervision. The Basel Committee’s work program states its objectives, which include restoring confidence in capital ratios, continuing to revise existing methods of measuring risk-weighted assets, assessing the role of stress testing, reviewing the regulatory treatment of sovereign risk as well as assessing the interaction of reform policies overall.

View the report.

The Prudential Regulation Authority published a consultation paper on assessing Pillar 2 capital adequacy under the Capital Requirements Regulation and the Capital Requirements Directive, together known as CRD IV. Pillar 2 aims to ensure that firms have sufficient capital to cover potential risks not sufficiently addressed in the prescriptive Pillar 1 requirements. The consultation paper sets out proposed changes to the current framework, rules and supervisory statements, focusing on: (i) new proposed methodologies for determining Pillar 2A capital (which aims to strengthen the relationship between an institution’s risk profile, risk management and risk mitigation systems); (ii) the buffer and the form it would take; (iii) governance and risk management; and (iv) disclosure. The consultation period closes on April 17, 2015. The PRA plans to publish its policy statement and final rules together with a supervisory statement in July 2015. It is expected that the new rules would apply from January 1, 2016.

View the consultation paper.

The following Delegated Regulations supplementing the Capital Requirements Regulation and the Capital Requirements Directive, together known as CRD IV, were published in the Official Journal of the European Union:

1. Delegated Regulation on the liquidity coverage requirement for credit institutions covering matters such as stress scenarios, the composition of the liquidity buffer and the general requirements for liquid assets. This Delegated Regulation will enter into force on February 6, 2015.

2. Delegated Regulation on the leverage ratio covering matters such as the calculation of the leverage ratio and the exposure value of derivatives. This Delegated Regulation entered into force on January 18, 2015.

View Delegated Regulation 1

View Delegated Regulation 2

The European Banking Authority published its second impact assessment report for the liquidity coverage ratio requirements under the Capital Requirements Directive and Capital Requirements Regulation, together known as CRD IV. The report is based on data provided by 322 European banks and concludes that the LCR is not expected to have a material detrimental impact on the business and risk profile of EU-established institutions. This is mainly because EU institutions have significantly improved their compliance with LCR requirements and the potential for making adjustments to balance sheets to meet LCR requirements.

View the report.

HM Treasury published the Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) Regulations 2015 ("the Amending Regulations") together with an explanatory memorandum. The Regulations amend the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014, which implemented all of the capital buffers under the Capital Requirements Directive except for the Systemic Risk Buffer and the Other Sysemically Important Institutions buffer. The Amending Regulations introduce the SRB for banks and investment firms. Capital buffers require firms to hold additional amounts of capital on top of their minimum capital requirements. Under CRD, member states are able to decide which firms should meet the SRB and must notify the European Commission, European Systemic Risk Board, European Banking Authority and national regulators of the reasons for use of the SRB. The SRB would apply to banks and building societies with deposits of more than £25 billion (i.e. it will apply to ring-fenced banks under the bank structural reform requirements), The Financial Policy Committee of the Bank of England will be responsible for setting the SRB and the Prudential Regulation Authority will apply the SRB on an entity-by-entity basis. The SRB is applicable from January 1, 2019.

View the Regulations.

View the explanatory memorandum.

The US Department of the Treasury (“US Treasury”), acting for the US Financial Stability Oversight Council (“FSOC”), issued a proposed rulemaking aimed to implement the Qualified Financial Contract (“QFC”) recordkeeping requirements of the Dodd-Frank Act. The proposed rules would apply to financial companies with $50 billion or more in consolidated assets, financial companies designated by the FSOC, as well as financial affiliates of these companies and would require recordkeeping of positions, counterparties, legal documentation and collateral. This information is needed to help the Federal Deposit Insurance Corporation (“FDIC”) as receiver to, among other things, decide whether to transfer QFCs, evaluate the consequences of decisions to transfer, disaffirm or permit the termination of QFCs with one or more counterparties, and conclude whether any financial systematic risks are posed by the transfer, disaffirmation or termination of such QFCs in the case of a distressed situation. The deadline for comments is April 7, 2015.

View the US Treasure press release.

View the Federal Register notice of proposed rulemaking.