Basel IV


Basel IV concerns the changes agreed in 2016 and 2017 to the international banking standards known as the Basel Accords. Regulators argue that these changes are simply completing the Basel III reforms, agreed in principle in 2010–11, although most of the Basel III reforms were agreed in detail at that time. The Basel Committee itself calls them simply "finalised reforms" and the UK Government has called them "Basel 3.1". Critics of the reform, in particular those from the banking industry, argue that Basel IV require a significant increase in capital and should be treated as a distinct round of reforms.

Requirements

Basel IV introduces changes that limit the reduction in capital that can result from banks' use of internal models under the Internal Ratings-Based approach. This includes:
These reforms will take effect from January 2022.
British banks alone may have to raise another £50Bn in capital in order to meet Basel IV requirements. The average Common Equity Tier 1 capital ratio for major European banks is estimated to fall by 0.9%, with the biggest impact on banks in Sweden and Denmark of 2.5%–3%.

History

is an international regulatory framework for banks, developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-08. It contains various rules on capital and liquidity requirements. The 2017 reforms complement the initial Basel III. This set of rules has been adopted on 7 December 2017 and has to be implemented by 2022. As the BCBS does not have the power to issue legally binding regulation, the Basel IV standards have to be implemented by national authorities.