The Basel IV reform is the 4th edition of the set of risk reduction measures designed by the Basel Committee to reduce risk in the banking sector. It is supported by the CRD V Directive and transposed by the CRR II Regulation; together they constitute a proposal for updating the European prudential framework.
The philosophy behind this reform is to reduce the flexibility granted to banks in their measurement of risk, and to prevent them from setting their own rules. Regulators and central banks had been concerned about the wide variations between banks in the way they calculated risk. To combat this, BCBS recommends imposing limits on how banks' models can diverge towards more conservative calculations.
In this White Paper, Adel Tamart, Business Analyst and Expert Consultant at Quanteam, explains his understanding of this reform and answers the following questions:
- Basel Accords, CRR, CRD... what are they all about?
- Is Basel IV simply the finishing touch to Basel III or a real evolution in risk management?
- What do banks now have to do differently as a result of this reform?
- What is the roadmap for implementing this reform?
- What is the impact of the new Basel IV requirements on banking establishments?
- How can banks successfully implement this reform?
- Do banks have enough time to prepare for the implementation of this reform (against the backdrop of the Covid-19 pandemic)?
an article written by...
Adel Tamart,
Quanteam Consultant
