What changed
The start date for Basel III capital regulations was moved from January 1, 2013 to April 1, 2013, following a December 2012 press release. Most instructions originally effective January 1, 2013 now apply from April 1, 2013, except Credit Valuation Adjustment (CVA) risk capital charges for OTC derivatives, which are deferred to January 1, 2014 due to pending issues with mandatory forex forward guaranteed settlement through a central counterparty.
What it means for you
Banks get a three-month reprieve to align systems and processes for Basel III compliance, but must be ready by April 1, 2013. The deferral of CVA risk charges gives banks more time to manage OTC derivative exposures without immediate capital impact. The unchanged full implementation deadline of March 31, 2018 means the overall transition timeline remains intact, requiring steady capital planning.
What you must do
- Ensure all Basel III capital regulations, except CVA risk charges, are implemented by April 1, 2013.
- Prepare to disclose Basel III capital ratios starting from the quarter ending June 30, 2013.
- Plan for CVA risk capital charges on OTC derivatives to become effective from January 1, 2014.
- Review and continue phasing out non-Basel III compliant capital instruments as per existing transitional arrangements.
Who it affects
All Scheduled Commercial Banks (excluding Local Area Banks and Regional Rural Banks), Bank treasury and risk management teams, Bank compliance and capital planning departments
Why was the Basel III start date shifted to April 1, 2013?
RBI rescheduled the start date from January 1, 2013 to April 1, 2013 via a press release on December 28, 2012, likely to give banks more preparation time.
When do CVA risk capital charges for OTC derivatives become effective?
CVA risk capital charges are deferred to January 1, 2014, because the mandatory forex forward guaranteed settlement through a central counterparty was postponed pending resolution of exposure norms and other issues.
Does the full implementation deadline of Basel III change?
No, the full implementation deadline remains March 31, 2018, with other transitional arrangements unchanged.