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QOTD -- RIP Basel 3?

In a week that has seen serious rollbacks of the Schengen Treaty and the Maastricht Treaty, it probably was only a matter of time before Basel Committee capital standards also started to fall. Throughout the week, we have seen various technical efforts chipping away at the regulatory framework (as analyzed HERE on LinkedIn).

But leave it to the Bank of England to tell it like it is.

Buried at the bottom of a press release announcing various regulatory program cancellations (including, drolly, this year's stress tests).....and after hinting to banks that next week they will deliver clarity on the appropriate approach to fair value accounting for expecte loss calculations given all the uncertainties associated with the COVID19 situation, Bank of England policymakers indicated that Basel 3 implementation is now in doubt.

This is a logical, honest move. But the implications for the Basel Committee and its standards are significant.

Only one policy at this stage, technically remains on track: the transition away from LIBOR. Policymakers that have been fighting the market fires all week have been silent regarding the transition to national-based benchmarks at the end of the year. Stay tuned.


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