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Bank regulation: ‘Basel IV’ sparks banker fury  

March 9, 2015

Sid Verma, Euromoney

The Basel Committee on Banking Supervision’s (BCBS) proposals to restrict banks’ use of internal models to determine their capital requirements and to limit their freedom to measure risk threatens to play havoc with banks’ capital planning and risk management.

Combined, the proposals represent a watershed in the Basel agenda to micro-manage risk, with some already calling this Basel IV. Not for attribution, bankers criticize it as an over-zealous and misguided bid to promote standardization that reveals more about the serial failures of bank regulators than about banks’ inadequate risk modelling.

In mid-December, the financial industry was caught off-guard by two Basel consultation papers from the BCBS addressing long-standing fears over the quality and comparability of risk-weighted capital ratios. It prescribes new metrics that would severely constrain the profitability of certain loan portfolios by hiking and shifting the composition of risk-weights.

Read More: Euromoney

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