An integrated approach to Basel IV
An integrated view of internal and regulatory metrics, risk reporting, scenario projections, and strategic planning ensures reliable and efficient risk assessment, management, and reporting.
The staggered implementation deadlines and discrepant requirements under various Basel-inspired frameworks magnify regional disparities – Australia, Canada, Hong Kong, Singapore, and Switzerland are further along in their implementations and have stayed true to the BCBS standards. The CRR III legislation to implement the Basel III standards, aka Basel IV in the European Union, deviates from the BCBS guidelines as does the UK PRA’s Basel 3.1 proposal and the US Basel III Endgame.
The shift from Basel III to Basel IV standards is a significant overhaul of banking systems and processes and with less than two years to the January 2025 implementation timeline, financial institutions have plenty to consider. Further, multi-region banks may have to operate under different Basel rules for different jurisdictions, making group consolidation and reconciliation difficult for compliance and reporting.
Adding to this complexity is how banks respond to and manage emerging risks such as ESG and Interest Rate Risk in the Banking Book (IRRBB)!
Financial institutions have traditionally approached risk management and regulatory reporting independently. The move to Basel IV is an opportunity for banks to consider building an enterprise view of all internal and regulatory metrics, across risk types and Pillar 1, 2, and 3. Such an approach while optimising banking resources, enables stakeholders to meet management and regulatory expectations with timeliness. Full integration facilitates an understanding of interdependencies among risks, a key element of Basel IV and an important capability when an institution is trying to gauge the true nature of its exposures and adjust them to satisfy regulators and meet commercial objectives.
When assessing your organisation's readiness to implement Basel III standards, consider these four factors.
Regulatory reporting
Understand and comply with regulatory implications related to model, data, reporting, controls, and validation for your business to meet compliance timeline business.
Enhance performance
Prepare technology and IT infrastructure for scalability, flexibility, robustness, and security to address data lineage, business, and auditing requirements.
Manage uncertainty
Evaluate capital allocation strategies through quantitative assessments of hypothetical and real market scenarios across various risk types.
Future compliance
Ensure seamless and friction-free updates to impacted components for future regulatory refinements without disrupting ongoing operations.
Read our whitepaper Integrating Pillars 1, 2 and 3: A Better Way to Basel IV for a roundup of implementation timelines and learn how an integrated view of internal and regulatory metrics, risk reporting, scenario projections and strategic planning ensures more efficient risk management.
Join Xavier Dubois from Wolters Kluwer at RiskMinds International as we analyse the implications of Basel IV on risk management practices and provide insights on how financial institutions can better manage their implementation.
About Wolters Kluwer
Wolters Kluwer (EURONEXT: WKL) is a global leader in information, software, and services for professionals in Health, Tax and Accounting, Financial Corporate Compliance, Legal & Regulatory, and Corporate Performance & ESG. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services.
Wolters Kluwer reported 2022 annual revenues of €5.5 billion. The group serves customers in over 180 countries, maintains operations in over 40 countries, and employs approximately 20,900 people worldwide. The company is headquartered in Alphen aan den Rijn, the Netherlands.
For more information, visit www.wolterskluwer.com