BAFT (Bankers Association for Finance and Trade)’s Post

Recommended reading for anyone in the industry who wants to understand more, particularly with a focus on the US.

🇺🇸 🏛️ The Basel Endgame: Implications for US credit insurance The Basel III proposals signify a global regulatory shift for banks, focusing on increased capital requirements and refined risk weight calculations. In the US, this implementation is called the ‘Basel endgame,’ while the UK refers to it as Basel 3.1 and the EU calls it Finalised Basel III. 🗣️ Trade Finance Global (TFG) spoke to industry leaders Sian Aspinall, Marilyn Blattner-Hoyle, Tod Burwell, Neal Harm, Scott Ettien, tomasch kubiak, Azzizza Larsen, Harpreet Mann, Jean-Maurice Elkouby, Hernan Mayol, Marcus Miller, Richard Wulff, looking at the implications of Basel III implementation in the US, and what this means for the trade finance and credit insurance sector. 📖 Read the full article by TFG's Deepesh Patel by following the link in the comments section below ⬇️ #basel #tradefinance #creditinsurance #USA

The thousand-plus-page proposal that constitutes the finale of the #global #regulatory response to the 2008-09 #financial #crisis. The #phase-in period looks to be #more #onerous than we had anticipated, with banks required to reach #80-per-cent #compliance with #B3E #RWA changes by [#July 1 2025] #basel III #federalreserve #occ #fdic #riskmanagement #capital

Yesterday on May 30, 2024, the European Union indicated that the last set of Basel III regulations, which establish stricter bank capital requirements beginning in January 2025, will be implemented. These regulations expand upon the safety measures put in place after taxpayers were forced to support lenders during the world financial crisis more than ten years ago. The Basel Committee, which consists of banking regulators from the major economies of the globe, developed the majority of the Basel III regulations, which are currently in effect. Nonetheless, a crucial addition known as a "output floor" is present in the final batch. This protection is meant to keep big banks from taking advantage of the system to their competitors' disadvantage, who have to employ more cautious calculation techniques, by preventing them from using their own computer models to determine capital buffers. Though the attached research dates back from 2021 (during the Covid crisis), it includes a detailed overview of the anticipated impacts on bank customers and the real economy in the EU. #GRC #BaselIII #EU #EBA #Endgame #capitaladequacy #riskmanagement #riskassessment #bankingsector #solvency #RiskWeightedAssets #Regulatorycapital #RWA

The Potential Risks of Basel III - The NACFB and Allica Bank have penned a joint letter to select MPs, urging a re-evaluation of the impacts of Basel III reforms on #SMElending. The letter is in addition to a meeting with HM Treasury last week, where representatives from both the NACFB and Allica continued to highlight concerns that increased capital requirements might curtail loan availability for #UKSMEs. Last month, the Bank of England announced a delay of the final phase of post-crisis international bank capital regulations until July 2025, mirroring the US Federal Reserve timeline. Originally slated for January 2025, full execution is now targeted for January 2030. The Bank anticipates releasing near-final policies covering several risk areas in Q4 2023. Getting slightly technical here, under the Basel III PRA proposals, there is a planned imposition of a 100% floor risk weighting on property-secured #businessloans. Coupled with the slated removal of the SME support factor, which presently allows for an approximately 24% reduction in capital requirements, the UK SME funding market is potentially staring at a concerning scenario. "One in which our European counterparts, who are seemingly adopting a softer stance on the Basel III requirements, might then find their lending sectors enjoying a competitive edge over ours," says NACFB Chair Paul Goodman. Writing in the latest edition of Commercial Broker magazine, Paul considers the potential impact and asks how can we safeguard the interests of UK SMEs, ensuring they continue to have ample access to crucial #funding? 

The adoption by the European Parliament of the Basel IV package (CRR III / CRD VI) on Wednesday April 24, 2024, introduces a number of new concepts into European banking regulations, as well as raising a number of questions: - a new standardized method for credit risk, impacting in particular real estate exposures, but also specialized lending, off-balance sheet exposures and others...; - new rules on collateral eligibility and the definition of LGDs; - a new definition of the capital requirement for operational risk; - a new definition of the prudential trading book; - and in particular, the introduction of the notion of "output floor", which raises the question of whether IRB models should be maintained, given the cost and risks to which they expose. These issues will be discussed in a dedicated conference-debate to be offered to our customers/partners in the coming weeks.

On 27 July 2023, the top three US bank regulators published the Basel III Endgame proposal aimed at improving the stability of big banks by introducing tougher capital requirements. Set by the Basel Committee on Banking Supervision in 2017, the proposed reforms would apply to all lenders with more than USD 100bn in assets, but smaller banks may also need to comply with the demand for higher capital buffers if they have significant trading activity. By increasing the degree of risk attributed to certain assets, banks would be required to hold proportionately more capital, which would have potential implications for lending and trading. Check out PwC’s take on Basel III Endgame 👇 https://lnkd.in/enF5ksvM #BaselIII #USBankRegulators #Banking #FinancialRegulation #GFC

Important news and events happening despite the widely accepted rule that August is a ‘dead’ month. Keep an eye on the debate around go live dates for Basel IV rules in Europe (aka Basel Endgame). These final set of regulations following the great financial crisis will continue to raise capital costs for banks, having a knock on effect for alternative asset managers they service. In focus is RWA, which has a broad reach, as it will further affect the cost of business for banks beyond the direct interaction with its clients, such as securities lending and refinancing activity. It may seem a way out with the US implementing the new rules in June 2025, and the UK & EU currently planning for Jan 2025, but it takes time to prepare. RWA costs are already a hot topic within the securities finance eco-system, and it continues to be important for asset managers to understand the capital cost impact of their business on its banking partners.