Mario Draghi declares the ECB agreement on a thorny set of revisions to Basel 3.

Rose Prince

2017-11-25 06:34:00 Sat ET

Mario Draghi, President of the European Central Bank, heads the international committee of financial supervisors and has declared their landmark agreement on a thorny set of revisions to Basel 3. Many bankers and pundits refer to these revisions as Basel 4. While many banks prefer to standardize their equity capital calculations under Basel 3, several multinational banks apply their own internal risk models to gauge appropriate common equity capital ratios. Now the primary concern relates to the unfortunate outcome that the minimum regulatory capital results would become lower for a given large bank if one chose to apply another bank's internal risk models. This discrepancy might arise from the fact that each bank exhibits different exposure to specific risk types such as commercial real estate default risk and operational risk. Due to this concern, Basel 4 revisions can fill the gap between fact and fiction to help circumvent regulatory arbitrage.

Large banks would need to incorporate loan-to-value ratios into the internal risk models of residential mortgage default risk. On balance, the overall capital floor is 72.5%, which reaches a healthy middle ground between the U.S. preference for 75% and the European tendency toward 70%. Proponents of U.S. financial deregulation suggest that substantially lifting the average capital ratio from 7% to 12%-15% would likely increase the prohibitively high cost of capital for banks, insurance companies, credit unions, and other financial institutions.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

World politics, economics, and new ideas from the Psychology of Money written by Morgan Housel

Daphne Basel

2023-10-19 08:26:00 Thursday ET

World politics, economics, and new ideas from the Psychology of Money written by Morgan Housel

World politics, economics, and new ideas from the Psychology of Money written by Morgan Housel We would like to provide both economic and non-economic th

+See More

With majority control, House Democrats pass 2 bills to reopen the U.S. government without funding the Trump border wall.

John Fourier

2019-01-12 10:33:00 Saturday ET

With majority control, House Democrats pass 2 bills to reopen the U.S. government without funding the Trump border wall.

With majority control, House Democrats pass 2 bills to reopen the U.S. government without funding the Trump border wall. President Trump makes a surprise Wh

+See More

President Trump criticizes his new Fed Chair Jerome Powell for accelerating the current interest rate hike.

Joseph Corr

2018-08-21 11:40:00 Tuesday ET

President Trump criticizes his new Fed Chair Jerome Powell for accelerating the current interest rate hike.

President Trump criticizes his new Fed Chair Jerome Powell for accelerating the current interest rate hike with greenback strength. This criticism overshado

+See More

Facebook, Apple, Microsoft, Google, and Amazon account for more than 15% of market capitalization of the U.S. stock market.

Jacob Miramar

2017-05-19 09:39:00 Friday ET

Facebook, Apple, Microsoft, Google, and Amazon account for more than 15% of market capitalization of the U.S. stock market.

FAMGA stands for Facebook, Apple, Microsoft, Google, and Amazon. These tech giants account for more than 15% of market capitalization of the American stock

+See More

AYA free finbuzz analytic report on the U.S. top tech titans FAMGA Spring-Summer 2020

Chanel Holden

2020-05-05 09:31:00 Tuesday ET

AYA free finbuzz analytic report on the U.S. top tech titans FAMGA Spring-Summer 2020

Our fintech finbuzz analytic report shines fresh light on the fundamental prospects of U.S. tech titans Facebook, Apple, Microsoft, Google, and Amazon (F.A.

+See More

Our proprietary alpha investment model outperforms most stock market indices from 2017 to 2021.

Apple Boston

2021-02-02 14:24:00 Tuesday ET

Our proprietary alpha investment model outperforms most stock market indices from 2017 to 2021.

Our proprietary alpha investment model outperforms the major stock market benchmarks such as S&P 500, MSCI, Dow Jones, and Nasdaq. We implement

+See More