What Is Basel IV?
Basel IV is an unofficial term that commonly refers to the recent changes to the Third Basel Accord (Basel III). One of the major changes in Basel IV is the introduction of an output floor such that the risk weighted assets (RWAs) calculated by internal models must not be lower than 72.5% of the RWAs calculated by the standardized approaches. The phase-in period for implementing the output floor starts on January 1, 2023, and ends on January 1, 2027.
Compared with Basel III, Basel IV introduces additional regulatory requirements and revises risk calculation methodologies in many areas, including:
- IRB output floor of 72.5%
- Fundamental Review of the Trading Book (FRTB)
- Leverage ratio framework
- Operational risk framework
- Securitization framework
- Credit valuation adjustment (CVA)
Examples and How To
See also: risk management, credit risk, liquidity risk, operational risk, Solvency II, FRTB, CECL with MATLAB, fraud analytics, MathWorks Modelscape Governance, MathWorks Modelscape Deploy, Modelscape