BCBS and WB – Proportionality in bank regulation and supervision – global survey results

July 30, 2021 – Summarizes responses from 90 authorities, broad geographic, income group range.

Background:
Concept of proportionality embedded in the work of Basel, carried out stock take in March 2019 to gauge the proportionality measures in place across member jurisdictions. A statement was then issued in November 2019 to provide perspective and direction for proportionate implementation, this clarifies proportionality can take different forms. Considering the above, a joint comprehensive global survey undertaken to facilitate greater understanding by all stakeholders of proportionality practices in different jurisdictions. The survey references 11 specific standards, guidelines, principles issued by BCBS. Respondents not just supervisors of commercial banks, also look after cooperative banks, development banks and non-bank deposit taking institutions (NBDTIs).

Key Findings:
Proportionate implementation is practiced widely, and the use of proportionality is growing, this is a work-in-progress but is also challenging for several jurisdictions. Is acknowledged as promoting banking stability, reducing unnecessary regulatory burden and compliance costs, making effective use of scarce supervisory resources. Significant proportion of respondents planning to implement or revise their approach. Challenges remain during the design of proportionate approach – how to define the tiering criteria, maintain level playing field, avoid opportunity for regulatory arbitrage. Also, post-implementation challenges – how to ensure financial positions still comparable across banks, how to reduce compliance costs and stress on resources. Implementation is motivated by factors other than risk profile or systemic relevance in some cases, – seeking to obtain/retain correspondent banking relationships. Aiming to meet expectation of host jurisdiction supervisors or of rating agencies, and proportionality implementation sometimes due to regulation and peer pressure.

For more information, visit www.bis.org.

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