Bankers welcome final Basel III rules through gritted teeth
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Bankers welcome final Basel III rules through gritted teeth

The eventual impact of the revised capital rules will be less severe than bankers feared a year ago, even though many lament regulators’ pivot away from internal ratings.

Markets reacted well to the final Basel III rules published in December, with bank share prices rising and analysts cutting their calculations for the additional capital requirement across the sector.

Bankers Euromoney spoke to welcomed the nine-year phase in for the 72.5% output floor below which they will not be allowed to use internal risk models to cut risk-weighted assets (RWAs) as they would otherwise be determined by the blunt standardized approach.

The good news is greater risk sensitivity now coming into the standardized approach, notably around corporate credit on the cusp of investment grade and unsecured SME exposures.

Executives at institutions with large mortgage books on their balance sheets were further relieved to see some recognition of protection in low loan-to-value assets. Increases in operational risk RWAs also came in below what some had feared.

TJ Lim, UniCredit

“The final document on Basel IV issued on December 7 is somewhat more favourable than was expected,” TJ Lim, chief risk officer at UniCredit, told investors at a presentation on Tuesday, adding that: “The impact on our capital ratios is well manageable.” Lim puts numbers on this: “For Basel IV, the current estimated impact on our CET1 ratio is around 0.9%,

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