Basel III Implementation Adjusted to National Interest

By : Herry Barus And Aldo Bella Putra | Saturday, December 09 2017 - 16:00 IWST

Wimboh Santoso Ketua Dewan Komisioner (Foto Anto)
Wimboh Santoso Ketua Dewan Komisioner (Foto Anto)

INDUSTRY.co.id - Jakarta - Chairman of the Board of Commissioners OJK Wimboh Santoso said Basel III framework will be implemented by prioritizing the national interest, so it is expected that the role of banks can be optimal in encouraging economic growth.

"In implementing international standards, OJK will continue to prioritize national interests, such as the weighting risk of sovereign exposure in our banking assets, we will continue to use ATMR Zero, which is an example of the success of international diplomacy that runs long and takes a long time ," said Wimboh in a statement received in Jakarta, Friday (8/12/2017)

This was stated by Wimboh after attending the meeting of the Governor of the Central Bank and Chairman of the Supervisory Authority of the Financial Services Sector (GHOS) of 27 member countries of The Basel Committee on Banking Supervision at European Central Bank, Frankfurt, Germany.

According to Wimboh, the GHOS forum decision in finalizing the Basel III framework will be easier to implement for the banking industry, including for the regulator to monitor its implementation.

"The calculation complexity of Risk Weighted Assets (ATMR) of banks will be reduced and can also improve the aspects of 'comparability' and transparency," he said.

The main agenda of the GHOS meeting in Germany is to finalize several regulatory reforms in the banking sector within the framework of Basel III.

The presence of OJK in this forum is one of the implementation of Indonesia's commitment as a member of G20 to conduct regulatory reform in the banking sector in accordance with global standards in creating a solid banking system.

Wimboh added that with the establishment of several Basel III reform agenda this means the reform of the regulation of the global banking system within the framework of Basel III is complete.

Furthermore, the GHOS forum will focus on consistent implementation of the Basel III framework through the Regulatory Consistency Assessment Program (RCAP).

Some of the Basel III aspects approved in the forum include the revision of the standard approach to credit risk and the revision of the internal rating approach to credit risk.

Then, a revision of the "credit valuation adjustment" (CVA) framework used in the calculation of "capital charges" for over-the-counter (OTC) derivative transactions over potential "mark-to-market" losses triggered by credit risk, including removal the internal approach of the model in its calculations and the adoption of a revised standard approach to CVA.

In addition, the adoption of a revised standard approach to operational risk replaces the current standard and advanced measurement approach "and the revised calculation of the debt to equity ratio and the application of" leverage ratio buffer "to systemically important global banks.

 

Finally, the determination of "output floor" for the ATMR is derived from the internal model of 72.5 percent of the calculation of the ATMR using a standard approach.

This prescribed arrangement takes effect on January 1, 2022 and gradually over five years. So is the withdrawal of the application of basel III for market risk, from the previous in 2019 to January 1, 2022.

In relation to the proposed government debt, both central and local government and debt to Central Bank which is considered to have no risk weight in the calculation of RWA, GHOS has set the current soverign exposure calculation arrangement with 0% RWA still valid.

This determination has a positive influence on the capacity of national banks in lending.

In this meeting it was also determined that a country would still be considered comply with the standards of the Basel framework when applying the standard approach although not applying the model's internal approach.

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