The Road to Basel IV: Wholesale Credit Risk
The Basel Accords have been issued by the Basel Committee on Banking Supervision (BCBS) since the late 1970s. Collectively they comprise a set of banking reforms that are intended to make significant changes to the way banks and investment companies calculate risk-weighted assets, hold prudential capital, and apply leverage. However, alongside the myriad of other regulatory reforms implemented since the global financial crisis, it is sometimes difficult to piece together the Basel journey as one end-to-end sequence of reforms.
In December 2017 BCBS published the final set of Basel III standards, known interchangeably in the industry as either “Basel IV” or “Basel 3.1”. New Link Consulting has published the first in a series of four in-depth thought pieces on the topic of Basel IV.
This article provides a summary of how the BCBS standards have evolved over time, culminating in the final Basel IV standards. It also addresses the potential for divergence from the Basel IV reforms (in terms of both the content of the regulation and implementation timeframes) across key jurisdictions. Subsequent articles will address some of the major impacts of the Basel IV regulation, notably prudential capital levels, wholesale credit risk, counterparty credit risk, credit valuation adjustment (CVA) risk and operational risk. The articles will also highlight implementation timelines, major impacts for in-scope financial institutions, along with headline implementation challenges.
At New Link Consulting we have gained a thorough understanding of the Basel III and IV frameworks through our consulting work over the past decade and remaining close to the evolving regulations. If you would like to find out how we can help you plan, manage and execute your deliver your Basel IV regulatory change program, please firstname.lastname@example.org for more information on our services.