The Basel Committee on Banking Supervision (Basel Committee) released a report on banking turmoil in 2023 to discuss the outlook for the global banking system from economic and financial market developments, which requires banks to disclose their positions in 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 accumulated vulnerabilities in a low interest rate environment.

These vulnerabilities include the risk of potential credit losses related to borrowers with rising debt service ratios and the interest rate sensitivity of bank depositors. Banks and regulators need to remain alert to the changing outlook and ensure operational resilience.

(Federal Reserve examiner says encryption business was the main reason for the collapse of Silvergate Bank)

Banks should disclose digital asset positions

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

Global standards for banks’ exposure to crypto assets have been proposed in 2022 and divided into two categories: Group 1 and Group 2. Group 1 includes tokenized traditional assets and stable coins, while Group 2 includes other unsecured crypto assets with higher risks, which require additional capital based on market risks, operational risks, etc.

(BIS sets global standards for banks’ exposure to crypto assets, expected to be implemented in 2025)

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