Basel IV

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Basel IV (officially: Basel III: Finalizing post-crisis reforms ) stands for the changes to international banking standards agreed in 2016 and 2017, known as the Basel Agreement . Regulators argue that these changes merely complement the Basel III reforms agreed in principle in 2010/11 , although most of the Basel III reforms were agreed in detail at this point. The Basel Committee (BCBS) itself describes them simply as "completed reforms". Critics of the reform, particularly from the banking sector, argue that Basel IV requires a significant increase in equity and should be treated as a separate reform round.

history

Basel III is an international set of rules for banks that was developed by the BCBS in response to the financial crisis of 2007/08 . It contains various regulations on capital and liquidity requirements. The reforms of 2017 (Basel IV) complement the original Basel III. This set of rules was adopted on December 7, 2017 (January 14, 2019 for adjustment to the market risk framework) and must be implemented by 2022 (2027 for the output floor). Since the BCBS is not authorized to issue legally binding regulations, the Basel IV standards have to be implemented by the national authorities.

conditions

Basel IV introduces new standards by which banks must calculate their capital requirements. This includes the following:

  • a standardized lower limit for risk-weighted assets (RWA), so that the capital requirement will always be at least 72.5% of the requirement of the standardized approach (output floor)
  • a simultaneous reduction in standardized risk weights for low risk mortgage loans
  • the request of banks to achieve a higher maximum leverage rate (an initial maximum of the leverage rate is expected to be set as part of the implementation of the Basel III package)
  • A higher leverage rate for the Global Systematically Important Banks (G-SIBs), with the increase corresponding to 50% of the risk-adjusted capital ratio.
  • More detailed disclosure of reserves and other financial statistics.

These reforms will initially come into force at 50% from January 2022, and from January 1, 2027 at 72.5%.

References

  1. ^ BCBS: Basel III: Finalizing post-crisis reforms. Retrieved June 23, 2020 .
  2. ↑ What is Basel IV? - Newsroom. Accessed January 30, 2020 .
  3. ↑ Bringing Basel IV into focus | McKinsey. Accessed January 30, 2020 (English).
  4. ↑ Risk South Africa 2019: IBOR Transition, FRTB, ESG, Initial Margin, and More. In: CompatibL. November 22, 2019, accessed January 30, 2020 .
  5. ^ Effects of Basel IV on corporate financing in Germany. Accessed January 30, 2020 .
  6. ↑ What is Basel IV? - Newsroom. Retrieved March 18, 2020 .
  7. ↑ Market and Credit Risk Model Validation Services & Solutions. In: CompatibL. Accessed January 30, 2020 (English).
  8. ^ Basel IV: Effects on the German Mittelstand. In: FinCompare. January 23, 2020, accessed on March 18, 2020 (German).