Basel 4

There will be no Basel 4 ^[1]

Basel 4 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.^[2]

Requirements

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

• Requiring banks to meet higher minimum leverage ratios;
• Emphasising simpler or standardised models, rather than banks' internal models, for calculation of capital requirements;
• 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.^[5]

History

Basel III's rules increased the amount of capital that banks must hold, and set a core tier 1 capital ratio of 7%. 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".^[6] 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.^[7]

External Links

• OECD: THINKING BEYOND BASEL III: NECESSARY SOLUTIONS FOR CAPITAL AND LIQUIDITY

References

1. Mark Carney, full citation needed (early 2016 press conf)
2. "Regulators look ahead to 'Basel 4'". ICAEW. Retrieved 18 May 2014.
3. "Basel 4 – Emerging from the mist". KPMG. Retrieved 18 May 2014.
4. "South Africa: Basel 4 – Emerging From The Mist?". Mondaq. Retrieved 18 May 2014.
5. "KPMG: UK Banks Facing New £50bn Capital Hole as 'Basel IV' Emerges". International Business Times. September 12, 2013. Retrieved 18 May 2014.
6. "KPMG Warns Over £50 Billion ‘Basel 4′ Capital Hole". Moneybeat. Retrieved 18 May 2014.
7. "Introducing “Basel 4”?… Basel Proposes Changes to Trading Book Market Risk Capital Requirements". Advantage Reply.