Newsletter April 2013: Basel Committee tightens large exposure regime

BASEL – A significant toughening of the current framework for measuring and limiting banks’ large exposures to single counterparties is proposed by the Basel Committee in a consultative paper, issued in late March. It intends this new regime to be complementary to its Basel III capital and liquidity standards. The proposed rules governing large exposures will have a binding Pillar 1 status in line with Basel III standards, rather than come under a softer, Pillar 2 approach that permits greater supervisory discretion. However, the Committee has decided not to specify internationally harmonised supervisory actions to be taken when a bank breaches the limit.