The Basel Committee on Banking Supervision has decided to introduce proposed changes to capital requirements for trading book exposures by the end of 2011.

The committee announced on Friday that it has agreed to adjust proposed revisions to market risk component of the Basel II capital requirements. In particular, it agreed to push the start date for the changes to December 31, 2011. When the revisions were announced in July 2009, they were slated to take effect at the end of 2010.

The committee suggests that the new start date will “provide supervisors with additional flexibility that will permit more robust implementation and review of changes to market risk models.”

As a result of the revisions that are now due to take place at the end of 2011, the Basel Committee says that the market risk capital requirements will increase by an estimated average of three to four times for large internationally active banks.

The Office of the Superintendent of Financial Institutions says that the Basel Committee decisions have implications for the implementation schedule in Canada. OSFI says it will proceed with implementation of the changes to Basel market rules for the trading book, and changes to capital requirements for securitization transactions, on a more flexible schedule, beginning with firms’ capital adequacy reporting in the first quarter of fiscal 2012.

Additionally, OSFI will continue with its planned review of institutions’ applications for trading book model approval on a revised schedule, culminating in a final approval decision in mid-2011. The regulator says that it expects this additional time for review and performance testing will mean there will be less need for conditions on the final approvals.

IE