The banking regulatory capital requirements have changed significantly over the last decade. Since the first Basel Regulatory Framework launched in 1988, the Basel Committee on banking supervision has introduced several reforms to ensure prudential regulation of banks.
Set to take effect from the 1st of January 2023, Basel IV is increasingly seen as an entirely new framework in comparison to Basel III.
Understanding Basel IV
One of the key objectives of the Basel IV framework is to restore credibility in banks’ calculation of risk-weighted assets by constraining banks’ use of internal risk models. Several reforms were included in various categories, including a standardised approach for credit risk, the quantification of CVA risk and operational risk approaches, an enhancement to leverage ratio framework, finalisation of output floor, and more.
In order to be fully prepared for Basel IV adoption, it’s critical for banks and financial institutions to understand the changes from the previously implemented Basel III framework.
This handy infographic summarises what you need to know about the latest Basel regulatory framework.
- An overview for banks, segmented by tiers
- A clear summary of Basel IV
- How OneSumX for Basel IV solution can help
- A breakdown of the 11 core areas relevant to Basel IV and Standardised Credit Risk:
- Exposure to corporates
- Regulatory to retail exposure
- Real estate exposure class
- Exposure to banks
- Exposure to covered bonds
- Exposure Multilateral Development Banks (MDS)
- Equity
- Subordinated debt
- Off balance sheet
- SCRA grading
- Due diligence
For each of the above areas view a clear comparison table of the core differences between Basel III and Basel IV.
Download Basel III vs Basel IV infographic
Download this easy-to-understand infographic by Wolters Kluwer to learn everything you need to know about Basel III and Basel IV differences.