Ensuring that international financial institutions can weather financial and economic stresses is the top priority of global regulatory bodies such as the Basel Committee on Banking Supervision and the Financial Stability Board.
In the wake of the global financial crisis, the Basel Committee has introduced an international regulatory framework for banks, known as the Basel III capital and liquidity standards, which are being progressively phased in.
Capital and liquidity (funding) are at the center of banks’ strategies, operations and business models – and therefore banks’ ability to support the economy.
Regulatory changes in these areas can affect banks’ issuance of securities, their demand for particular funding sources, the level of market liquidity for instruments to hedge risk, and the price and availability of credit.
The IIF has supported the work of the Basel Committee in ensuring the safety and soundness of financial institutions and markets. The IIF believes that for the banking sector to play its optimal role in supporting the economy, it is critical that the financial system is stable, and that institutions are well-managed and backed by robust buffers for their solvency and liquidity. It is equally critical that banks are not unduly constrained from performing their roles as providers of credit and liquidity.
The IIF convenes a series of Steering Committees, Working Groups and Task Forces to share and develop perspectives on these pertinent issues, and prepares formal Responses on behalf of the industry as part of regulator Consultation programs.
As well as the formal consultation processes with the Basel Committee on the upcoming introduction of new liquidity measures, significant focus is currently on the Leverage Ratio and the use of Internal Risk-Based models for RWA, via the IIF RWA Task Force (IRTF).
Current engagements are also in progress on Operational Risk and interest Rate Risk in the banking Book (IRRBB).