Basel Committee consults on capital floors
22 December 2014
The Basel Committee on Banking Supervision has published today a consultative paper on the design of a capital floor framework based on standardised, non-internal modelled approaches.
The Committee's proposed floor would ensure that the level of capital across the banking system does not fall below a certain level. The floor is also meant to mitigate model risk and measurement error stemming from internally-modelled approaches. It would also enhance the comparability of capital outcomes across banks.
As noted in the Committee's November 2014 report to the G20 Leaders, the Committee is taking steps to reduce variation in capital ratios between banks. Today's consultative paper is part of a range of policy and supervisory measures from the Committee that aim to enhance the reliability and comparability of risk-weighted capital ratios.
The Committee is revising the Basel framework's standardised approaches for regulatory capital and has also published today Revisions to the Standardised Approach for credit risk. The proposed capital floor framework will be based on the finalised versions of these standardised approaches, and would replace the existing transitional capital floor based on the Basel I framework.
The floor's calibration is outside the scope of this consultation. The Committee will consider the calibration of the floor alongside its work on finalising the revised standardised approaches to credit risk, market risk and operational risk, taking into account its ongoing review of the capital framework and its balance of simplicity, comparability and risk sensitivity.
The Committee welcomes comments from on all aspects of this consultative document. Comments on the proposals should be uploaded here by Friday 27 March 2015. All comments will be published on the website of the Bank for International Settlements unless a respondent specifically requests confidential treatment.