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Basel IV is a contested term used to describe the changes agreed in 2016 and 2017 to the international banking standards known as the Basel Accords; regulators argue that these changes are simply completing the Basel III reforms, agreed in principle in 2010-11, although most of the Basel III reforms were agreed in detail at that time. Critics of the reform, in particular those from the banking industry, argue that Basel IV require a significant increase in capital and should be treated as a distinct round of reforms.
- A standardised floor, so that the capital requirement will always be at least 72.5% of the requirement under the Standardized approach;
- A simultaneous reduction in Standardised risk weights for low risk mortgage loans;
- Requiring banks to meet higher maximum leverage ratios (an initial leverage ratio maximum is likely to be set as part of the completion of the Basel III package);
- A higher leverage ratio for Global Systemically Important Banks (G-SIBs), with the increase equal to 50% of the risk adjusted capital ratio
- 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. The average Common Equity Tier 1 (CET1) capital ratio for major European banks is estimated to fall by 0.9%, with the biggest impact on banks in Sweden and Denmark of 2.5% - 3%.
Basel III's rules increased the amount of capital that banks must hold, and set a core tier 1 capital ratio of 27%. 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". 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.
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- "Introducing "Basel 4"?… Basel Proposes Changes to Trading Book Market Risk Capital Requirements". Advantage Reply.