Basel 4
Basel 4 is a proposed standard on capital reserves for banks, to mitigate against the risk of financial crisis. It is expected to follow the third Basel accords (Basel III) , and would require more stringent capital requirements and greater financial disclosure.[1]
Requirements
Basel 4 is likely to include:[2][3]
- Requiring banks to meet higher minimum leverage ratios;
- Emphasising simpler or standardised models, rather than banks' internal models, for calculation of capital requirements;
- More detailed disclosure of reserves and other financial statistics.
British banks alone may have to set aside another £50Bn of reserves to meet Basel 4 requirements.[4]
History
Basel III's rules increased the amount of capital that banks must hold, and set a core tier 1 capital ratio of 7%. The technical implementation deadline for Basel III is 2019, but recent developments in the banking market have suggested that even stricter rules may be applied by a later framework, which has been dubbed "Basel 4".[5] The Basel Committee on Banking Supervision released a consultative paper, seeking out views on the Committee's plan to change how capital requirements and market risks are calculated.[6]
External Links
References
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