Basel 4

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Basel 4 as it is dubbed by the financial industry is a proposed standard on capital reserves for banks, to mitigate against the risk of financial crisis. It is expected to follow the third Basel accords (Basel III) , and would require more stringent capital requirements and greater financial disclosure.[1]

Requirements[edit]

Basel 4 is likely to include:[2][3]

  • Requiring banks to meet higher maximum leverage ratios (an initial leverage ratio maximum is likely to be set as part of the completion of the Basel III package);
  • Emphasising simpler or standardised models, rather than banks' internal models, for calculation of capital requirements (the Basel committee has made initial proposals on simpler models as part of the completion of the Basel III framework);
  • More detailed disclosure of reserves and other financial statistics.

British banks alone may have to set aside another £50Bn of reserves to meet Basel 4 requirements.[4]

History[edit]

Basel III's rules increased the amount of capital that banks must hold, and set a core tier 1 capital ratio of 27%. The technical implementation deadline for Basel III is 2019, but recent developments in the banking market have suggested that even stricter rules may be applied by a later framework, which has been dubbed "Basel 4".[5] The Basel Committee on Banking Supervision released a consultative paper, seeking out views on the Committee's plan to change how capital requirements and market risks are calculated.[6]

References[edit]

  1. ^ "Regulators look ahead to 'Basel 4'". ICAEW. Retrieved 18 May 2014. 
  2. ^ "Basel 4 – Emerging from the mist". KPMG. Retrieved 18 May 2014. 
  3. ^ "South Africa: Basel 4 – Emerging From The Mist?". Mondaq. Retrieved 18 May 2014. 
  4. ^ "KPMG: UK Banks Facing New £50bn Capital Hole as 'Basel IV' Emerges". International Business Times. September 12, 2013. Retrieved 18 May 2014. 
  5. ^ "KPMG Warns Over £50 Billion 'Basel 4′ Capital Hole". Moneybeat. Retrieved 18 May 2014. 
  6. ^ "Introducing "Basel 4"?… Basel Proposes Changes to Trading Book Market Risk Capital Requirements". Advantage Reply. 

External links[edit]