Industry on Alert for “Basel IV”
A recent article by the American Banker argues that the sweeping changes to the Basel III international accord that are expected in the coming years will amount to no less than a new capital regime and are warning of the advent of “Basel IV.” Anticipated changes include raising the risk-based capital ratio, revising risk weightings, and moving away from model based assessments in the calculation of capital requirements reflective of operations, market and credit risk. At the recent G20 meeting in Brisbane, global leaders received a preview of the upcoming reform agenda from the Financial Stability Board (“FSB”), the international standard-setting body charged with implementing the reforms.

Among other things, the FSB reported plans to propose new standards for total loss absorbing capacity that will make it easier for regulators to wind down too-big-to-fail banks. The Basel Committee, in the meantime, is reportedly finalizing work on capital requirements governing trading books, operational risk and credit risk. However, market watchers do not expect the term “Basel IV” to become common any time soon. As stated in the article, “That’s partly because the idea of Basel IV would be unpopular with banks, especially considering Basel III is still being finalized and implemented.”
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