Global Regulators Move Forward With Capital Rules For Crypto Banks

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By Huw Jones

LONDON (Reuters) – Global regulators said on Tuesday they would complete work by the end of the year on how much capital banks should hold to cover crypto-assets on their books.

Last June, the committee proposed that banks set aside enough capital to fully cover losses on bitcoin holdings.

Some traditional tokenized assets and stablecoins could, however, be subject to existing capital rules and be treated like bonds, loans, deposits or commodities.

Earlier this month, TerraUSD, a stablecoin pegged to the US dollar, crashed.

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“Recent developments have further underscored the importance of having a global minimum prudential framework to mitigate the risks associated with crypto-assets,” the Basel Committee said in a statement.

“Based on feedback received from external stakeholders, the Committee expects to publish another consultation paper in the coming month, with a view to finalizing the prudential treatment towards the end of this year.”

Basel member countries are committed to applying its agreed principles in their own national rules.

The committee also said it had agreed on a finalized set of principles for monitoring climate-related financial risks in banks.

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“The principles, which will be released in the coming weeks, aim to promote a principle-based approach to improving risk management and oversight practices to mitigate climate-related financial risks,” Basel said.

The committee also agreed that the eurozone is a national jurisdiction when it comes to calculating an additional capital buffer for large global systemic banks based there.

Treating their intra-euro area exposures as domestic, resulting in lower capital charges than non-domestic exposures, should reduce the magnitude of additional capital buffer requirements for some euro area lenders.

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The European Central Bank, which regulates big lenders in the eurozone, said it was a step towards a more integrated banking sector in Europe and the creation of a genuine internal market.

Fitch Ratings said last December that the change could see some banks like BNP Paribas drop the additional aggregate cushion requirement altogether.

(Reporting by Huw Jones; editing by Jonathan Oatis)

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