The CNB signs joint letter in support of Basel III
On 7th September 2021, the Czech National Bank, together with 24 other supervisory authorities and central banks of some EU Member States, became a signatory of a joint letter addressed to leading European Commission representatives responsible for financial stability, financial services and capital markets union (hereafter only “letter” (pdf, 502 kB)). In the letter they express their support for a full, timely and consistent implementation of the Basel III international framework for the prudential regulation of banks.
The purpose of the letter is to counterbalance efforts within the EU to dilute the Basel III framework. In the signatories’ view, adhering to the Basel III framework is in the best interest of Europe as it strengthens the resilience of banks and thus economic growth. Adherence to the globally agreed standards also facilitates comparisons of banks. Moreover, past crises have demonstrated the interdependencies between economies globally which highlights the need for consistent global rules.
More specifically, the letter clearly indicates support for the new and more risk-sensitive standardised approach for credit risk, the minimisation of EU specific deviations and in particular, for the output floor which represents a limit for savings on capital requirements when applying internal models and where all its layers should be calculated on the basis of one single set of risk-weighted assets. The CNB, in addition, supports the application of the output floor to all levels of consolidation.