RBI is also yet to come out with draft regulation on revised Pillar 3 disclosure requirements
RBI is also yet to come out with draft regulation on revised Pillar 3 disclosure requirements

RBI falls short of meeting Basel III requirements: Report

  • The committee reports that India’s central bank is yet to publish the securitization framework and rules on total loss-absorbing capacity (TLAC) requirements
  • According to the report, India’s G-sibs are in the process of implementing the rules on Interest rate risk in the banking book (IRRBB)

Mumbai: The Reserve Bank of India has fallen short of meeting tougher requirements set by the Basel III norms, according to a report by the Basel Committee on Bank Supervision (BCBS).

The semi-annual report brought out by the BCBS, a committee under the Bank For International Settlements, looked at adoption status of Basel III standards by 30 global systemically important banks (G-Sibs) as of end-May 2019. This committee of banking supervisory authorities aims to enhance understanding of key supervisory issues and also improve the quality of banking supervision worldwide.

The committee reports that India’s central bank is yet to publish the securitisation framework and rules on total loss-absorbing capacity (TLAC) requirements. Globally, the norms on securitisation exposures held in the banking book had come into effect on 1 January, 2018.

The RBI also missed the deadline for meeting the TLAC requirement, which ensures that G-Sibs have adequate loss absorbing and recapitalisation capacity so that critical functions can be continued without taxpayers’ funds or financial stability being put at risk. These include instruments that can be either written down or converted into equity, like capital instruments and long-term unsecured debt. The TLAC constitutes 16% to 20% of a group's consolidated risk-weighted assets.

The RBI is also yet to come out with draft regulations on revised Pillar 3 disclosure requirements, which took effect from end-2016. Pillar 3 disclosures aim at ensuring market discipline through disclosures in prescribed format, while Pillar1 focuses on capital adequacy and Pillar 2 looks at the supervisory review process.

According to the report, India’s G-sibs are in the process of implementing rules on interest rate risk in the banking book (IRRBB). These regulations refer to the current or prospective risk to the bank’s capital and earnings arising from adverse movements in interest rates that affect the bank’s book positions. The central bank had issued draft guidelines in February 2017 and is yet to come out with final guidelines.

Globally the rules were effective from end-2018.

India’s G-sibs include State Bank of India, ICICI Bank and HDFC Bank

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