Fitch monitors banking sector as regulations evolve

March 13, 2023 (MLN): Progress in the rollout of Basel III final rules, changes in global systemically important banks’ (G-SIBs) capital buffers, and scrutiny of banks’ exposures to non-banks are amongst the key items, says Fitch Ratings.

Many jurisdictions are making progress towards the implementation of Basel III endgame rules. China implemented them on 1 January for its largest commercial banks, while the go-live date is end-March for internationally active Japanese banks.

The UK and the US are still to finalize their reform packages, with the US Federal Reserve Chair flagging it will likely make significant changes to its proposal.

The annual update in the list of G-SIBs underlined a higher systemic footprint of Chinese banks as well as of UBS, ahead of its merger with Credit Suisse (based on end-2022 figures).

The Basel Committee on Banking Supervision recently proposed G-SIB indicators to be reported based on daily averages to avoid window-dressing practices at year-end.

Fitch also flags increased supervisory scrutiny over banks’ exposures to non-bank entities, which includes further exploratory stress tests to uncover potential financial stability-related vulnerabilities.

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