BASEL IV COMPLIANCE
R&C: Could you explain the global reach of Basel IV? In which regions is its implementation more advanced?
Barbosa: Basel IV, or the completion of Basel III implementation, brings a substantial revision of the global regulatory framework, seeks to restore credibility in the calculation of risk weighted assets (RWA) and improves the comparability of banks’ solvency ratios. It will fundamentally change the calculation of RWA across the different risk types – credit, market, operational, counterparty credit risk (CCR) and credit valuation adjustment (CVA) risks. This will be driven either by standardised or internal model approaches, including the rules of a wide set of relevant topics for the banking business, such as large exposures, securitisations, leverage, output floor, step-in risk, interest rate risk in the banking book (IRRBB), the treatment of investment funds or underlying disclosure requirements. Regarding the implementation of Basel IV across the globe, there are several different realities. In Europe, namely within the European Union (EU), the process of translating the Basel guidance into effective law is typically slow, taking up to one year, and requires a great deal of discussion until a final agreement is reached at the European parliament. Countries such as Australia, Canada, Singapore and Hong Kong appear to be at a more advanced stage, showing greater flexibility and capacity to adopt the referred changes, at least from the regulatory side.
Jan-Mar 2020 Issue
PwC
SAS