Today theBasel Committeeon Banking Supervision (BCBS) published the latest Basel III monitoring report, which gathered data on 177 banks globally. Just 28 banks disclosed crypto-asset exposures for the six months to June 30, 2023. Digital asset custody figures rose 79% to €4.4 billion across all banks. However, comparatives may not be reliable.
American banks are largely absent from the custody sector, with just €11 million under custody across 11 banks. This can be primarily attributed to the SEC accounting rule (SAB 121) that makes itprohibitive for U.S. banksto provide digital asset custody.
European banks dominatedigital asset custodywith €3.7 billion held in custody, almost all spot cryptocurrencies. Two banks in the ‘rest of the world’ provide custody for €665 million, also for spot crypto.
Digital asset exposures
Regarding prudential exposures — i.e., banks holding crypto or tokenized securities on their balance sheets — the figures total €1.5 billion across all banks globally. Two-thirds of that is in Europe, with most of it in spot crypto, followed by tokenized assets.
The BIS figures also disclose ‘other’ exposures, which mainly relate to services provided on behalf of clients. Globally, this figure increased from €91.5 billion at the end of 2022 to €128 billion mid-2023. However, there were four more banks in the 2023 sample, so it is conceivable that the increase could represent more banks reporting.
There is also a big geographic divide here. Banks in the Americas provided €126 billion of the €128 billion in client-related service exposures. While Europe’s €2 billion was mainly spot crypto, in the Americas, the figures are dominated by exchange-traded products. And that was long before the launch of the spot Bitcoin ETFs.
Previous reports are available forDec 22,June 22, andDec 21. However, there will be inconsistencies between them owing to measurement changes and the make up of banks providing statistics.
FAQs
Forty-five bank regulators worldwide, including those in the United States, formulate and agree to apply generally consistent bank capital requirements through an international standard-setting body called the Basel Committee on Banking Supervision.
What is Basel Framework International Regulatory Standards for banks? ›
The BCBS has drawn up standards to ensure that banks and other credit institutions maintain enough capital and liquidity to meet their obligations and absorb unexpected losses. The latest accord, Basel III, was agreed at international level to address the fall-out from the global financial crisis of 2007–2008.
What does the Basel Accord an international agreement requires banks to hold capital based on? ›
Under Basel I, banks that operate internationally must maintain capital (Tier 1 and Tier 2) equal to at least 8% of their risk-weighted assets. This ensures banks hold a certain amount of capital to meet obligations.
How should the holdings of cryptocurrency be measured initially and subsequently under us gaap and ifrs standards? ›
Under the proposed update to the standard, cryptocurrencies will be measured at fair value, with changes in value recognized in net income in each reporting period. The new rules are expected to become effective for reporting periods beginning on December 15, 2024, with early adoption permitted.
What are Basel 3 norms USA? ›
Basel III introduced a non-risk-based leverage ratio as a backstop to the risk-based capital requirements. Banks are required to hold a leverage ratio in excess of 3%, and the non-risk-based leverage ratio is calculated by dividing Tier 1 capital by the average total consolidated assets of a bank.
What does Basel mean in banking? ›
The Basel Framework is the full set of standards of the Basel Committee on Banking Supervision (BCBS), which is the primary global standard setter for the prudential regulation of banks.
What is a Basel 4 compliant bank? ›
Basel IV is the informal name for a set of proposed international banking reforms that began implementation on Jan. 1, 2023, and are expected to take five years to fully implement. Basel IV builds on the earlier Basel Accords: Basel I, Basel II, and Basel III.
What are the Basel 7 operational risks? ›
Basel II set out seven categories of operational risk:
- Internal Fraud.
- External Fraud.
- Employment Practices and Workplace Safety.
- Clients, Products and Business Practices.
- Damage to Physical Assets.
- Business Disruption and System Failures.
- Execution, Delivery, and Process Management.
Basel 4 included new standards for credit risk and operational risk and a credit valuation adjustment. It also introduced an output floor, revisions to the definition of the leverage ratio and the application of the leverage ratio to global systemically important banks.
What are the three pillars of Basel norms? ›
The three pillars of Basel III are market discipline, Supervisory review Process, minimum capital requirement. Basel III framework deals with market liquidity risk, stress testing, and capital adequacy in banks.
What Is Tier 1 Capital? Tier 1 capital refers to the core capital held in a bank's reserves and is used to fund business activities for the bank's clients. It includes common stock, as well as disclosed reserves and certain other assets.
Are Basel Accords mandatory? ›
The Basel II Accord makes it mandatory for financial institutions to use standardized measurements for credit, market risk, and operational risk. However, different levels of compliance allow financial institutions to pursue advanced risk management approaches to free up capital for investment.
What is the US GAAP treatment of cryptocurrency? ›
Under current GAAP, crypto assets that meet the definition of an indefinite-lived intangible asset are recognized at cost and subsequently measured using the impairment model in ASC 350-30, Intangibles—Goodwill and Other—General Intangibles Other Than Goodwill.
Are cryptocurrency exchanges legal in the United States and fall under the regulatory scope of the Bank Secrecy Act BSA? ›
The BSA mandates financial institutions, including cryptocurrency exchanges like Binance, to maintain robust AML programs. These programs must include customer identification procedures, record-keeping, and reporting of suspicious activities to U.S. authorities.
How do I use my cryptocurrency as evidence of assets? ›
Show latest statement or get letter from the financial institution indicating value of account. Statement or letter should show the investor's name or investor should otherwise prove ownership of the account. It is not necessary to show social security numbers, full account numbers, or individual positions.
Does Basel 3 apply to all banks? ›
Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.
Does the U.S. follow the Basel Convention? ›
The United States signed the Basel Convention in 1990. The U.S. Senate provided its advice and consent to ratification in 1992. The United States, however, has not ratified the Convention because it does not have sufficient domestic statutory authority to implement all of its provisions.
What Basel IV means for US banks? ›
Basel IV is widely expected to require a significant increase in a bank's capital. Increased capital requirements force a bank to raise more equity or lend less, translating into higher costs for banks and borrowers. Any existing or proposed lending relationship will be closely scrutinized for profitability.
Is Wells Fargo Basel 3 compliant? ›
The Basel III framework applies to Wells Fargo & Company and its subsidiary banks.
