The implementation date of the Basel III standards, new international rules for governing banks’ capital requirement, will be pushed back by one year in accordance with agreement by member countries including South Korea to help increase flexibility in lenders’ response to financial stress caused by COVID-19.

The Bank of Korea said Monday that it will delay the implementation of the outstanding Basel III standards by one year to Jan. 1, 2023, including the revised market risk framework and new disclosure arrangements, in accordance with the decision made by fellow central banks and the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of Basel Committee on Banking Supervision (BCBS). The implementation date for accompanying transitional arrangements will be accordingly deferred by one year to Jan. 1, 2028.

Basel III is an international regulatory accord developed in the wake of the 2007-2008 financial crisis to bolster resilience of the global financial system by strengthening bank capital requirement.

The announcement comes after GHOS members and the head of central banks on Friday agreed on a set of measures designed to “provide additional operational capacity for banks and supervisors to respond to the immediate financial stability priorities resulting from the impact of the coronavirus disease (COVID-19) on the global banking system.”

The Korean government, however, will bring forward the implantation date of Basel III rules related to credit risk evaluation – the revised standardized approach for credit risk and revised internal ratings-based approach for credit risk – to June this year to help banks bump up their loan capacity for corporates, according to a separate announcement made by the Financial Services Commission on Monday.

The revised rules, whose implementation date was originally set as Jan. 1, 2022, are designed to lower risk sensitivity on loans to small and medium-sized businesses and improve the comparability of banks’ capital ratios.

By Cho Jeehyun

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