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New ‘Basel IV’ capital requirements proposed for banking sector 

December 5, 2016

Fraser Tennant, Financier Worldwide

In what is a crucial period for the European economy, new proposals for setting the capital requirements for the banking sector have been officially unveiled by the Basel Committee on Banking Supervision (BCBS).

The proposals, supposedly the final set of revisions being made to the Basel III Framework (part of the BCBS’s continuous effort to enhance the banking regulatory framework), clarify rules on combating money laundering and terrorist financing in correspondent banking. Many commentators have dubbed the latest modifications, ‘Basel IV'.

The first accord, Basel I, had three objectives: (i) to make sure banks held sufficient capital to cover their risks; (ii) to level the playing field among international banks competing cross-border; and (iii) to facilitate comparability of the capital positions of banks.

The BCBS’s revised proposals are intended to ensure that banks conduct correspondent banking business with the best possible understanding of the applicable rules on anti-money laundering and countering the financing of terrorism. According to the BCBS, the draft proposals reflect growing concerns in the international community about banks avoiding these risks by withdrawing from correspondent banking, which may, in turn, affect the ability to send and receive international payments in entire regions. Read more

 
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