Basel III Finalization - calculations ready but is bank steering as well?
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I personally worked with one of the large German banks on a "Basel IV" impact study back in 2016 and early 2017...now, after various delays things are getting real. Most banks are technically prepared by now but is the bank steering as well?
From our point of view, the following elements are required to successfully manage the finalization of Basel III:
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Be aware of international differences: Basel III endgame with differing implementation horizons and capital impact (US > UK > EU). Especially global banks need to be aware and steer accordingly
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Get your calculation toolkit ready: Transparency on Basel IV impact on a loan / trade level as well as tool to assess impact on an aggregated level is the basis for steering and risk management decisions
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Adapt steering and pricing: Strategy and overarching principles needed now to avoid surprises down the road. Or are we actually already down the road and a bit too late to the game?
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FTP adjustments: Change FTP in line with the above mentioned strategy and implement changes in systems. It might be a good opportunity for a more general FTP review
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Refine capital planning: While most banks have included Basel IV impacts on an overarching level, a detailed analysis linked to the granular business plans and the pricing strategy is often missing
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Regulatory reporting: New data attributes to be integrated into regulatory reporting to allow Basel IV RWA calculation. There are RWA optimization opportunities via data enhancements
Which challenges do you see? Where are you in the journey? How can the community help you?
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