Perspectives on the “Mini-Basel III” Concept in the Supranationalization Process of EAEU Banking Regulation and Supervision

Abstract

The objectives of economic integration suggest countries’ mutual efforts to their implementation. In fact, the post-crisis recovery demonstrated that there is virtually no alternative to Basel III standards and recommendations in protecting against external shocks and strengthening the stress resilience of banks. Besides, in the EU, the Basel III mechanism has become the basis for the standardization of regulatory policies. However, in the EAEU, integration processes are still missing any banking regulation accords, while the variety of the national regulatory regimes hinders integration and slows down the process of supranationalization of the regulatory architecture, threatening the exacerbation of systemic risks and, ultimately, the erosion of strategic focus within the framework of the EAEU’s single financial market and the EAEU integration at large. This article is the first attempt to propose the perspectives of bringing together the national regulatory regimes in the EAEU based on Basel III as well as reaching the consensus in the “Mini-Basel III” concept in order to further strengthening the economic basis of integration processes, including minimization of systemic risks and ensuring financial stability. Based on the analysis of banking supervision standards in the EAEU member states and their quantitative metrics in 2015–2024 (i.e., from the moment the Basel III standards have been phasing-in in the EAEU member states), we came to the conclusion that different regulatory regimes are the main source of systemic risks, while single regulatory regime will minimize systemic stress subject to implementation of the Mini-Basel III framework. Furthermore, taking into consideration the increasing uncertainty and riskiness in the Eurasian financial market, we have developed scenarios of financial integration that are based on the Mini-Basel III concept and without it. At the same time, the dominance of implicit and often apparent advantages of the different vs. single regulatory regimes, as well as sanctions imposed on Russia and the threat of secondary sanctions against the remaining EAEU member states will impede implementation of the Mini-Basel III concept. The proposed Mini-Basel III concept could be used by financial regulators in developing an EAEU supranational banking regulation mechanism, including for regulation of the prospective regional banking union.