Global banks look set to face higher capital requirements under proposed revisions to regulators’ approach to trading risk, according to a report published Wednesday
The report from the Basel Committee on Banking Supervision details the projected impact of proposed changes to its framework for assessing market risk, which was set out in consultations published in October 2013 and December 2014. The Basel Committee is aiming to finalize its approach by the end of the year.
Revisions to the market risk rules would increase the overall minimum capital requirement under the Basel III capital rules by 4.7%, the report says. The reports’s results are based on a sample of 44 banks that provided data to the regulators, and assumes that the new rules were adopted as of Dec. 31, 2014.
When the bank with the largest value of market risk-weighted assets is excluded from the sample, the projected increase in total market risk capital charges would be 2.3%, the report says.
In addition, the report indicates that, compared with the current market risk framework, the proposed standard would generate a weighted average increase of 74% in aggregate market risk capital. Although, for the median bank in the same sample, the capital increase is 18%.