[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea announced on the 30th that "the Governors and Heads of Supervision (GHOS) of major central banks have decided to extend the final implementation deadline of the Basel III regulatory framework by one year." This means that the internationally recognized banking capital regulation 'Basel III' will be postponed from January 2022 to January 2023.
On the 27th, GHOS made this decision through a voting procedure conducted via email. GHOS is the highest decision-making body that determines the main directions of the Basel Committee on Banking Supervision (BCBS) and oversees its operations. Bank of Korea Governor Lee Ju-yeol also participated.
BCBS reviewed the proposal to extend the final implementation deadline of the Basel III regulatory framework to enable banks and supervisory authorities to respond effectively to the COVID-19 pandemic and reported it to GHOS, which approved it through the email voting process.
The Basel III regulatory reforms were completed at the end of 2017, and the market risk regulatory framework was revised and announced on January 15 of last year.
Following this decision, GHOS members are now able to extend the final implementation deadline of the Basel III regulatory framework by one year.
A Bank of Korea official stated, "With the extension of the final implementation deadline of the Basel III regulatory framework, domestic banks will experience a reduced regulatory compliance burden, which is expected to strengthen financial service support for responding to COVID-19."
However, financial authorities decided to advance the implementation of parts related to Basel III credit risk assessment by six months. According to the revised Basel III regulations, the credit risk assessment includes lowering the risk weights for small and medium-sized enterprise loans and the loss given default rates for certain corporate loans.
This reduces the capital regulation compliance burden on banks regarding corporate loans, providing an incentive to supply more funds to companies.
A Bank of Korea official explained, "GHOS postponed the regulatory implementation deadline by one more year, which had been considered a burden for banks, but domestic financial authorities decided to implement first the parts where regulations have been eased to allow banks to increase corporate lending."
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