Basel News

Private equity, which has the second-highest risk weighting, carries a 400% weight under the current Basel III banking framework.

Banks may soon take a softer stance on crypto as the Basel Committee prepares to revise its 2022 guidance on banks’ exposure to digital assets, according to Bloomberg.

The current capital reserve requirements and rules make holding cryptocurrencies too costly for banks, limiting the sector’s growth.

The European Banking Authority completed draft rules requiring banks to assign a 1,250% risk weight to unbacked cryptocurrencies like Bitcoin and Ether.

The UK’s central bank wants to monitor the stability of crypto and set future policy; it has asked local firms to disclose their current and future crypto plans.

The committee is unveiling the standards later in July, culminating a yearslong process.

Should longer-term assets be allowed as reserve assets, the committee thinks these must overcollateralize the claims of stablecoin holders.

The committee already imposes a limit on crypto holdings in bank reserves, but the concentration of crypto in a small number of banks contributed to the March crisis, it said.

Volatile cryptocurrencies such as Bitcoin would also be subjected to a 1,250% risk premium.

The committee of central banks and regulators has proposed a “conservative prudential treatment” of crypto assets that banking groups say is prohibitive.