Bank for International Settlements – BIS

We’ve just wrapped up an inspiring SupTech Techsprint! We hosted 97 participants from 30 authorities around the world. The Techsprint teams tackled challenges shared by supervisors, regulators, and policymakers—developing ideas for better ways to handle the tremendous volume of data that must be analysed from many sources in many different formats. Our participants embodied the power of collaboration. Throughout this three-day Techsprint, we saw how finding common ground enables us to address shared challenges and unlock innovative solutions. Thank you to all who participated for your energy, creativity, and commitment. Your ideas have reaffirmed that collaboration is the key to finding better, smarter solutions.

Basel III capital and liquidity ratios remained stable in the second half of 2023, according to the latest Basel III monitoring exercise. Current capital ratios increased slightly, and capital ratios on a fully phased-in Basel III basis decreased slightly. In the same period, the dividend payout ratio for large internationally active banks remained stable. The monitoring report, based on data as of 31 December 2023, sets out trends in current bank capital and liquidity ratios and the impact of the fully phased-in Basel III framework. It covers both large internationally active banks (Group 1) and other smaller banks (Group 2). The monitoring exercise also collected bank data on Basel III liquidity requirements. The weighted average Liquidity Coverage Ratio (LCR) is stable compared with the previous reporting period. Three Group 1 banks reported an LCR below the minimum requirement of 100%. The weighted average Net Stable Funding Ratio (NSFR) decreased for Group 1 banks. And all banks reported an NSFR above the minimum requirement of 100%. The Basel III framework is a set of measures agreed to internationally and aimed at strengthening the regulation, supervision and risk management of banks. The report is accompanied by interactive dashboards that allow users to explore the results with greater ease and flexibility. Further details are available here: https://lnkd.in/es-kM2kw #BaselCommittee #BaselIII

Productivity growth has recently fallen back to or below the pre-pandemic trends, with the notable exception of the United States. In the latest BIS Bulletin, Deniz Igan, Tom Rosewall and Phurichai Rungcharoenkitkul examine how cross-country differences in productivity growth can be explained by structural factors, such as weak investment and population ageing, coming on top of pandemic-related disruptions. They conclude that boosting productivity in a sustainable way cannot be left to macroeconomic policies designed to bolster economic growth. Rather, the clearer path to long-term prosperity is through growth-enhancing structural policies. Read more at https://lnkd.in/eZXmUYNb #BISBulletin #Productivity

Do established principles of monetary policy still stand in an era of supply headwinds?  Deputy General Manager Andrea M Maechler tackles this question in an address to students at the The London School of Economics and Political Science (LSE).  She argues that inflation will probably be more volatile in future in the face of more frequent supply shocks, such as climate events which can push up food prices or a jump in energy costs due to geopolitical tensions.  Central banks have in the past tended to dismiss, or look through, such shocks. But if these shocks become a feature of the economic landscape, central banks will have to exercise care when assessing whether they can “look through” the inflationary effects of supply shocks. In some cases, central banks may have to lean more forcefully against inflation to contain the risk of transitioning to a regime in which high inflation becomes entrenched. “At times, forceful monetary tightening will be needed to ensure that inflation expectations remain anchored. In this vein, we also need to be mindful that monetary policy cannot shield the economy from adverse supply shocks that lower potential output,” she said. Looking forward, central banks will need to strengthen their analytical toolbox to assess the nature and transmission of supply shocks and how monetary policy should react to maintain trust in the purchasing power of money. 

The Basel Committee on Banking Supervision’s latest progress update on the adoption of the Basel Framework shows that member jurisdictions have made significant progress on implementing the final elements of Basel III standards for banks over the past year. Since the last progress update at end-September 2023, around half of the Committee’s 27 member jurisdictions published final rules for the revised credit risk, market risk and operational risk standards as well as the output floor. As a result of this progress, more than two thirds of member jurisdictions have now published final rules for all the final elements of Basel III, and these standards are in force (ie implemented by banks) in more than a third of member jurisdictions. The monitoring dashboard provides the implementation history of Basel standards by member jurisdictions, including the publication and implementation dates of their domestic regulations. The entire history is available for download from the Committee’s website. At the 13 May 2024 meeting of the Group of Governors and Heads of Supervision (the Committee’s oversight body), members unanimously reaffirmed their expectation of implementing all aspects of the Basel III framework in full, consistently and as soon as possible. They noted that the series of shocks to financial markets over the past few years once again highlighted the importance of having a prudent global regulatory framework in place and tasked the Committee with continuing to monitor and assess the full and consistent implementation of Basel III. Read more here: https://lnkd.in/enVmuxid #BaselCommittee #BaselIII

Housing costs represent a large portion of household expenditures, especially in advanced economies. Hence, they constitute a significant component of the consumer price index. These costs have continued to rise at a fast clip during the past two years in many economies, despite the intense monetary policy tightening phase. Has the housing component of the CPI evolved differently compared with past disinflation episodes? Is its strength a cause of concern for central bankers? In the latest episode of our BISness podcast, Deniz Igan speaks to Smita Aggarwal and argues that the answer to both questions is “yes”. She also unpacks the drivers and implications of the recent strong growth in housing costs. Listen to the podcast on the BIS website or your favourite podcast platform Read the BIS Bulletin for more at https://bit.ly/4eZO7EY #BISness #BISBulletin #HousingCosts #Podcast Apple Podcast: https://lnkd.in/ePtdFv7B Spotify: https://lnkd.in/egDXMMJj Our website: https://lnkd.in/eV2aHrYJ

Tsvetelina Nenova from the BIS Monetary and Economic Department is the winner of the 2024 Edition of the Ieke van den Burg Prize for her paper “Global or regional safe assets: evidence from bond substitution patterns”. This prestigious award is granted by the Advisory Scientific Committee of the European Systemic Risk Board to recognize outstanding research conducted by young scholars on a topic related to its mission. 📷 Adrian Petty/ECB

“A giant leap is what we need in the finance sector. To be more concrete, we need to make sure that our small experiments serve to realise a broader vision of the future financial system. Having a vision gives us a sense of direction. It helps us identify the most pressing gaps in our knowledge. And it tells us which experiments are the most important”, said General Manager Agustín Carstens at the fireside chat with MIT Digital Currency Initiative (DCI) Head of Programs, F. Christopher Calabia, CAMS In his interaction with students and faculty, Agustín Carstens summarized a vision that he and co-author Nandan Nilekani expressed about the future of the financial system called the “Finternet”. As proposed in their paper, the Finternet will allow different financial ecosystems to transact with each other more easily and instantaneously and “empower individuals and businesses by placing them at the centre of their financial lives”. A big thank you to MIT’s Digital Currency Initiative for hosting and providing a platform for these crucial conversations on the future of money and the role of public sector in its advancement. Learn more about Finternet: https://bit.ly/4avY628

Financial Stability Institute Chair Fernando Restoy recently spoke on financial crisis management and shared lessons for the European bank resolution framework. The 2023 banking crises in the United States and Switzerland tested those countries’ post- Great Financial Crisis resolution frameworks. While actions taken preserved financial stability, they deviated from standard procedures and required external support, highlighting areas for improvement. Restoy explained that there are strong reasons to extend resolution planning obligations to all banks whose failure could have adverse effects on the financial system. Crucially, resolution plans should include well defined requirements for a minimum amount of loss-absorbing liabilities in resolution. Those requirements should be calibrated to directly support the feasibility of the envisaged resolution strategy and ideally be composed primarily of debt instruments rather than equity as the latter might well largely disappear before resolution is triggered. In addition, Restoy maintained that planned resolution strategies should be more an array of options for deploying different tools than a rigid playbook. Importantly, experience shows that it is wise to put in place well defined procedures for the delivery of extraordinary external support in extreme circumstances. According to Restoy, the EU now has a great opportunity to address the deficiencies identified in the current bank crisis management framework, particularly with regard to the failure of mid-sized banks. The European Commission’s crisis management and deposit insurance (CMDI) legislative proposal is a highly valuable and internally consistent initiative whose spirit and main features should be preserved in the ongoing political negotiations. https://lnkd.in/ey8FA-v4 #FinancialStabilityInstitute #BankingReform #CrisisManagement #BankResolution

A new report from the BIS’s Financial Stability Institute describes the outcomes of a cross-border crisis simulation exercise conducted with financial authorities from seven countries in Latin America. The exercise took place in February 2024. Seventeen central banks, supervisory authorities and deposit insurers from Costa Rica, the Dominican Republic, Ecuador, Guatemala, Honduras, Mexico and Peru managed the simulated failure of a fictional regionally systemic cross-border banking group. This gave the participating authorities an opportunity to assess the effectiveness of their crisis management frameworks and cross-border cooperative arrangements and to identify areas for improvement. The report finds that the participants developed sound strategies for managing the crisis, focusing primarily on domestic solutions. However, owing to limitations in the available tools and funding sources, implementing a group resolution strategy proved challenging. Based on those findings, the report makes recommendations on topics including resolution tools, recovery and resolution planning, liquidity and funding, domestic coordination and cross-border cooperation and information-sharing. #FinancialStabilityInstitute https://lnkd.in/eh5wVZjH