Blog

From Basel III to Basel IV/Basel 3.1/CRR III & CRD 6 - What has changed? - Article 6

“Basel IV” * is one of the hottest topics in global banking.

Basel IV is known by many names, including: “Finalised Reforms" of Basel III (by the Basel Committee for Banking Supervision (BCBS)), "Basel 3.1" (in the UK), “Capital Requirements Regulation (CRR) III & Credit Requirements Directive (CRD) 6” (in the European Union) and “Basel III Endgame (B3E)” (in the USA).

Many refer to it as a separate capital accord (i.e., “Basel IV”) given the sizable scale of the modifications being introduced. Importantly, Basel IV will generally increase capital requirements for many banks depending on their current level of capitalisation and the nature of their business models. Implementation dates for Basel IV vary widely globally and, to date, have only been introduced in a very small number of countries such as Saudi Arabia last year.

The original Basel I (1988) offered quite simple risk weights focusing on credit risk and later provided a market risk (1996) component. Subsequently, Basel II, 2.5 and III were launched addressing capital, liquidity and leverage prudential standards. However, in 2012, the BCBS initiated a comprehensive review of the risk-weighted capital framework to finalize Basel III (first introduced in 2010) to strengthen the resilience of the global banking system.

Five years later (2017), the Basel Committee published finalized rules covering major issues associated with calculating capital ratios and Risk Weight Assets (RWA) for banks. Since then, introduction dates have been repeatedly extended for many reasons including the significant development work required and the COVID-19 pandemic.

In many jurisdictions, including the UK, EU and the United States, significant implementation work remains and is on-going.

------------------------------

RiskTAE would be glad to discuss your requirements as we have a team of seasoned Risk professionals to deliver solutions.    

Do you require any further training, consultancy, or recruitment on FRTB and Basel IV?

RiskTAE can provide on-site training on premise anywhere in the world and can cover many topics across Risk, Governance and Compliance.  

Course outlines are available by emailing: education@risktae.com

For all other enquiries, including consulting and recruitment, please email us at: info@risktae.com

 ------------------------------

RiskTAE has also partnered with an international banking education firm that can provide Basel IV and FRTB Online Self Study courses.

Course outlines for the Self-Study courses are also available by emailing: info@risksexplained.com

Or, you can go directly to the web site: www.risksexplained.com

 ------------------------------

* - Basel IV is now part of the regular vernacular. Basel IV is not a single regulatory framework, but rather a collection of changing international banking standards and includes “FRTB” (Fundamental Review of the Trading Book). In fact, the Basel Committee views these reforms as simply completing the Basel III Accord and contests the use of the unapproved term ‘Basel IV’. The Basel Committee itself calls them simply "finalised reforms" and the UK Government calls them "Basel 3.1". Critics of the reform, in particular those from the banking industry, argue that Basel IV will most likely require a significant increase in capital and should be treated as a distinct round of reforms being introduced by the Bank for International Settlements (BIS) and its Basel Committee on Banking Supervision (BCBS).

Therefore, “Basel IV” is the generally used informal name for the new banking reforms and includes “FRTB” (Fundamental Review of the Trading Book; for market risk capital purposes). Irrespective of the terminology, significant new burdensome requirements are being introduced by the Basel Committee. Basel IV is also known under different names, including:

• “Basel IV” = “Finalised Reforms" of Basel III by the Basel Committee (BCBS)  
• "Basel IV" = "Basel 3.1" in the UK
• “Basel IV” = “Capital Requirements Regulation (CRR) III and Credit Requirements Directive (CRD) 6” in European Union. 
• “Basel IV” = “Basel III Endgame (B3E)” in USA
• “Basel IV” = Global name used by many given the scale of the modifications

------------------------------

By: Benn Pople (Managing Director, Talent, RiskTAE Limited) and Mark Dougherty (Managing Director, Advisory and Education, RiskTAE Limited)

London, UK – 11th September 2024

Reference: Basel IV - Q3/2004 - 1  

#riskmanagement #frtb #baselIV #basel4 #marketrisk #bankingindustry