There is no doubt that international bank regulation is one of the most action-packed topics there is, easily beating out stamp collecting and certainly on par with crocheting toilet doilies.
The grand institution of the trade is, of course, the Basel Committee on Banking Supervision (BCBS), which is mandated with setting global standards for the prudential regulation of banks.
The Basel Committee was established in 1974 by a group of 10 central bank governors and then expanded in 2009 and 2014. As of today, the BCBS has 45 members from 28 jurisdictions.
Right from the beginning, BCBS has focused on creating rules for a level playing field of banking, specifically ensuring that no bank escapes regulation, and that banks play equally nice at home and abroad.
Their first paper (1975) was called the Concordat* and concerned banks’ presence in foreign jurisdictions with respect to liquidity, solvency, and foreign exchange operations.
The hot interest for adequate capital didn’t coming along until after Black Monday/Tuesday (1987), which sparked fear about systemic contagion in global financial crises.
Since then, the Basel Capital Accords have moved through the world like the Avengers insofar that there has been a release I, II, III, and an endgame. But where at least two more Avengers movies are underway, a widespread implementation of the Basel III Endgame is starting to look iffy.
The EU has postponed key parts until 2026, the UK until 2027, and the US even getting around to making a revised proposal seems a concept of yesteryear.
That is all very sad and expensive because the alternative to global rules is not “no rules” but a different set of local rules for each jurisdiction. That quickly multiplies the number of regulatory processes banks have to go through to maintain an international presence.
And another revelation from Captain Obvious is that deregulating banking will not de-risk banking, quite the opposite.
Requiring banks to hold less capital for rainy days will allow them to take more risk, and at a time when the weather forecast has heavier clouds on the horizon.
An idea that has been floated lately is to reduce the Supplemental Leverage Ratio (SLR) that requires large US banks to hold at least 5% of capital against their total assets, regardless of the risk of those assets.
The banks have called no fair on the SLR because they feel they are being punished for holding risk-free assets such as cash and treasuries.
The clog-up of the treasury market during the pandemic caused cash and treasuries to be taken out of the SLR from April 2020 to March 2021. The large banks—backed by the US Treasury—are keen to make that a permanent deal.
However, who can forget the now-infamous flight of the safe haven on April 9th, 2025, when treasury yields lost their stoic calm in the midst of the tariff storm?
Could have been a random blip on the radar, could have been a harbinger of risk to come.
*Not to be confused with The Conclave, in which Ralph Fiennes showed us how Stanley Tucci did not get promoted to Pope Leo XIV.
Regitze Ladekarl, FRM, is FRG’s Director of Company Intelligence. She has 25-plus years of experience where finance meets technology.
This article is part of the FRG Risk Report, published weekly on the FRG blog. To read other entries of the Risk Report, visit frgrisk.com/category/risk-report/.