This piece of thought leadership aims to put this latest package of Basel reforms in historical perspective, focusing on the goals of regulators and politicians to anticipate the way forward.
There has been a public interest in banking regulation in recent months. The US elections resulted in a public discussion to overhaul the Dodd-Frank Act, which was one of the main regulatory responses to the 2008 financial crisis. In Europe, the public debate focuses on how the current low profitability of banks and high non-performing loan portfolios in some countries could pose risks to the stability of the system. Amid these developments the Basel Committee aims to finalise reforms on capital requirements. Their recent meeting in Sweden did not result into a final outcome.
KPMG member firms continue to see regulators after the Committee's meeting in Sweden openly struggling to complete the final package of post-crisis reforms, which we have been referring to as “Basel 4” since 2013. The reforms aim to address flaws in the way banks are required to measure risks and determine how much capital they need to withstand unexpected losses. Credit risk measurement is particularly surrounded by controversy in the public debate right now.
The finalization of post-crisis capital standard reforms would mark an important milestone in the journey by policy makers and regulators to strengthen the resilience of the banking sector (and address the weaknesses identified through the 2008 financial crisis).
This piece of thought leadership aims to put this, latest package of Basel reforms in historical perspective, focusing on the goals of regulators and politicians to anticipate the way forward.