Crypto distribution is uneven among banks as prudential exposure rises: BIS report

Around 20% of banks have exposure to crypto assets, a Bank for International Settlements (BIS) report released Feb. 28 found. The majority of those banks are in the Western Hemisphere.

According to the report — which is based on data from the first half of 2022 — 17 Group 1 banks reported approximately 2.9 billion euros in crypto-asset prudential exposure and 1 billion euros in crypto assets under custody. A Group 1 bank is one that has Tier 1 capital of more than 3 billion euros and is internationally active. Tier 1 capital is a bank’s equity capital and disclosed reserves.

The 17 banks make up slightly less than 20% of the total monitored. Eleven of them are in the Americas, with four in Europe and two in other parts of the world. Thus, crypto-asset holdings represented a tiny fraction of the banks’ holdings:

“In relative terms, prudential exposures make up only 0.013% of total exposures on a weighted average basis across the sample of banks reporting cryptoasset exposures, while cryptoassets under custody make up only 0.005% of total exposures.”

The BIS has instituted standards limiting banks to 2% crypto reserves by the beginning of 2025.

The #Basel_III monitoring report in full is herehttps://t.co/NjKcPTKOxr

— Hyun Song Shin (@HyunSongShin) March 1, 2023

Among the entire set of banks monitored, crypto-asset exposure represents 0.003% of total exposures, and crypto assets under custody represent 0.001% of the total. Prudential exposure rose 30% over the first half of the year, and custody decreased by 66%. The latter figure was particularly impacted by banks dropping out of the study, the report notes, while the rest of the decrease was due to falling crypto asset market values.

A single, unidentified bank accounted for 61.7% of all crypto asset prudential exposure, and four other banks made up 35% of exposure. Clearing and trading created almost three-quarters of all prudential exposure. Bitcoin (BTC) was the largest underlying exposure at over 40%, with Coinbase coming in second slightly with under 30%. Ether (ETH) was a distant third with less than 5%.