Ready or Not, Here Comes Basel IV
By John Heltman
International regulators are gearing up to make significant changes to capital requirements over the next few years in a shift so massive that some observers have already begun talking about under a new name: Basel IV. Over the next three years, regulators are poised to make sweeping alterations to the existing Basel III international accord, including raising the risk-based capital ratio, revising risk weightings, and moving away from model-based assessments as part of a revamp of the capital requirements for operational, market and credit risk. “The sum total of all of these is a really new capital regime. It’s effectively Basel IV,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, the first analyst to use the term. The Financial Stability Board detailed many of these changes in a communiqué to the G-20 ahead of its meeting last month in Australia, but few have seized on just how sizable they would be.