Basel Committee to consider disclosure requirements for banks’ crypto assets

Published

1 year ago

October 6, 2023

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The fallout from the banking crisis earlier this year continues as the Basel Committee on Banking Supervision considers requiring banks to disclose their crypto asset holdings. The committee, which operates under the aegis of the Bank for International Settlements, identified holding crypto as one of the factors that led to the demise of several banks in March.

At its meeting on Oct. 4–5, the committee looked at the causes behind the failures of Silicon Valley Bank, Signature Bank of New York and First Republic Bank, as well as the near-failure of Credit Suisse, which was later bought by its competitor UBS.

According to the committee’s report, three structural trends may have indirectly contributed to the banks’ failures: the increasing role of nonbank intermediation in recent years, crypto assets concentrated in a small number of banks and the ability of customers to move their funds faster due to increasing digitalization.

The report also examined policy issues in detail.

*Supervisory and regulatory issues in the banking crisis of 2023. Source: Basel Committee*

The report especially highlighted the role of crypto in the failure of Signature Bank. The committee found:

SBNY’s significant client concentration of digital asset companies put it in a precarious position when the “crypto winter” hit in 2022. […] SBNY’s poor governance and inadequate risk management practices put the bank in a position where it could not effectively manage its liquidity in a time of stress.

Signature was closed by the New York State Department of Financial Services on March 12. The regulators stated at the time that crypto was not behind its decision.

The discussion is not an indication of planned revisions to the Basel Framework, the report said. In January, the committee amended its framework to limit crypto assets in bank reserves to 2%.

At its 4-5 October meeting, the #BaselCommittee agreed to consult on cryptoasset and climate disclosures, approved the annual G-SIB assessment and published its report into the banking turmoil of early 2023 #BaselIII #FinancialRegulation https://t.co/iLVbtP2VzS pic.twitter.com/aSRw7YYHP7

— Bank for International Settlements (@BIS_org) October 5, 2023

A statement accompanying the report said a consultation paper on crypto asset exposure disclosure would be published soon.

This is only the latest rehash of the banks’ difficult days in March. The United States Federal Reserve Bank and the Federal Deposit Insurance Corporation (FDIC) published their conclusions on the events in April, with the FDIC taking another look at it in August.

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