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COMOROS EYES UP REVAMP OF CAPITAL ADEQUACY REGULATIONS UNDER BASEL III GUIDELINES

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The banking authorities in Comoros have announced plans to revise the country’s capital adequacy regulations in line with the Basel III guidelines. The proposal, which is now open for public comment, aims to strengthen risk management practices and enhance the resilience of banks operating in the island nation.

Key Changes Proposed Under Basel III Guidelines

The proposed changes include:

• Expanded Risk-Based Approach: An expanded risk-based approach for credit risk will allow regulators to capture a broader range of risk weights and differentiate between exposure categories.
• Improved Market Risk Sensitivity: The proposal seeks to improve market risk sensitivity by introducing a standardized approach for calculating regulatory capital requirements.
• Standardized Operational Risk Measurement: A new standardized approach for measuring operational risk will apply to all large banking organizations in Comoros, increasing transparency, comparability, and certainty in the measurement of operational risk.

Additional Provisions

The proposal also includes changes to the credit valuation adjustment (CVA) requirements. Banks will be required to reflect potential losses resulting from increases in CVA for most over-the-counter derivative contract counterparties.

Implementation Timeline

Banks operating in Comoros with total assets exceeding $100 billion or more and their subsidiary depository institutions will be subject to the revised regulations. The proposal includes a three-year transition period for compliance, with a proposed compliance date of July 1, 2025.

Public Comment Period

The agencies are soliciting public comment on the proposed rulemaking, with a submission deadline of November 30, 2023.