After Basel III went into effect, the Basel Committee wanted to revisit transparency and consistency in risk measurements across approaches, jurisdictions, and banks. As a result Basel IV was introduced. It is how detractor banks describe the second wave of proposals, as these came later and somewhat unexpectedly, unlike the Basel III draft rules. The current state of the suggested Basel IV changes would rework the approach to Risk-Weighted Assets (RWA) and possibly internal ratings, as well as set regulatory capital floors. According to analysts, if banks do nothing to mitigate their impact, these rules will require about €120 billion in additional capital, while reducing the banking sector’s return on equity by 0.6 percentage points. This is a game changer for the European banking industry.
But there is a brewing issue among European Banks whether the global regulator’s proposed new rules could directly hit Europeans’ wallets. However the proposed rules from international banking regulators are intended to make banks safer and prevent another financial crisis requiring bailouts with taxpayers’ money, as happened in 2008. These sweeping reforms for banks across the world are on the cusp of being finalized whilst some banks don’t like those rules. Meanwhile some EU politicians have very publicly denounced proposals from the Basel Committee on Banking Supervision. They claim that banks in the bloc would be put at a competitive disadvantage if the proposed rules are enforced in their current form. And some critics claim that could in turn harm lending to European businesses and households. The U.S. seem to be more supportive of the rules — leading some to charge that the process is being led by U.S. banking interests. Some opine that mortgages and other loans could become more expensive, and transport companies, for example, have said the proposals as they stand will make improving Europe’s rail networks more costly. In such a scenario, the higher costs for rail companies will very likely be passed on to the traveler.
It is important to know the next big wave what the Global Banking & Financial Landscape is facing, and to prepare ourselves whilst being aware of the regulatory changes and how to apply them in our accounting books. The 7th Annual Annual Risk Management Forum titled ‘RISK ZONE 2017’ is an ideal opportunity for professionals to discuss and find out the regulatory changes what are coming into effect with the Basel IV rules and how to tackle them. The event is scheduled to be held on 14th & 15th September 2017 in Vienna, Austria.