Basel Committee on Banking Supervision: Banks should disclose digital asset exposures to prevent financial risks

The Basel Committee on Banking Supervision has released a report on banking sector resilience in 2023, discussing the outlook for the global banking system in light of economic and financial market developments, and calling for banks to disclose their exposures to digital assets.

Risks and Vulnerabilities in the Global Banking System

The Basel Committee on Banking Supervision believes that while higher interest rates can support banks' net interest margins and related income, they may also expose vulnerabilities accumulated in a low-interest-rate environment.

These vulnerabilities include potential credit loss risks, rising debt service ratios for borrowers, and interest rate sensitivity for bank depositors. Banks and regulatory authorities need to remain vigilant, monitor evolving prospects, and ensure operational resilience.

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Banks Should Disclose Digital Asset Exposures

The Basel Committee on Banking Supervision believes that banks should disclose their digital asset exposures and will soon release a consultation document.

Global standards for banks' exposure to crypto assets were proposed as early as 2022, divided into two categories: Group 1 includes tokenized traditional assets and stablecoins, while Group 2 comprises other higher-risk unsecured crypto assets, requiring additional capital based on market risk, operational risk, etc.

The BIS has established global standards for banks' exposure to crypto assets, expected to be implemented starting in 2025