Beyond the Horizon of Banking Regulation: What to Expect from Basel IV?
18 Pages Posted: 26 Dec 2016
Date Written: December 21, 2016
Since its inception, the Basel III international regulatory framework for banks has manifested a number of weaknesses in tackling the idiosyncratic and systemic risks arising from highly leveraged credit institutions. The continuing reliance on internal rating models to calculate capital requirements and the loss-absorbing capacity of prudential buffers have come under severe scrutiny by competent authorities. Against this backdrop, rumors of new structural reforms in banking regulation have started spreading into the G20 financial markets. The re-modulation of international capital and disclosure requirements for global banks — already labeled the “Basel IV package” — seems to be emerging, and the potential impact on the industry as a whole is likely to be significant. Sketching what might be the major elements of this new regulatory proposal is therefore critical for predicting how global banks will need to adjust their risk management and governance structure in the upcoming years.
Keywords: Basel III, Basel IV, Prudential Regulation, TLAC, Sovereign Risk, Operational Risk, Capital Requirements, G-SII, Capital Requirements, Credit Risk
JEL Classification: K22
Suggested Citation: Suggested Citation