Banking Regulations Updates

Banking regulations are constantly evolving, reflecting the changing landscape of the financial industry and the global economy. These regulations are designed to protect consumers, maintain the integrity of financial systems, and promote economic stability. Here, we will discuss the latest updates in banking regulations.

Basel IV Regulatory Framework

The Basel Committee on Banking Supervision (BCBS) released the final version of Basel IV in December 2017, with implementation expected by 2023.

Standardized Approach for Credit Risk

Under Basel IV, banks are required to calculate their credit risk using both the standardized approach (SA) and an internal ratings-based (IRB) approach. The SA will act as a ‘floor’, or minimum requirement, which means that banks cannot hold less capital for credit risk under the IRB approach than they would under the SA.

Operational Risk Framework

The Basel IV framework also introduced a new standardized approach for operational risk, which replaces the previous approaches. This new approach simplifies the regulatory framework and enhances comparability among banks.

Banking Regulation Updates in the United States

In the United States, banking regulations have seen significant changes under the Biden administration.

Community Reinvestment Act (CRA)

The Office of the Comptroller of the Currency (OCC) has proposed changes to the Community Reinvestment Act (CRA). These changes aim to increase bank lending, investment, and services in low- and moderate-income neighborhoods.

Climate Risk

The Biden administration has signaled that it will focus on climate risk in its regulatory agenda. This includes potential regulations that require banks to disclose their exposure to climate-related financial risks.

Banking Regulation Updates in the European Union

The European Union (EU) has also been active in updating banking regulations.

Banking Package for COVID-19 Relief

In response to the COVID-19 pandemic, the EU has adopted a banking package to facilitate bank lending to households and businesses throughout the EU. The package includes changes to capital requirements regulations and the Capital Requirements Directive.

Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF)

The EU has proposed a new regulation to establish an EU-level supervisor for AML and CTF. This new authority will be responsible for ensuring that EU-wide AML/CTF rules are effectively implemented across all member states.

Conclusion

Changes in banking regulations reflect the dynamic nature of the financial industry and the global economy. Banks must stay up-to-date with these changes to ensure compliance and maintain their competitive edge. The Basel IV framework, changes in US and EU banking regulations, and the increasing focus on climate risk and AML/CTF are all part of the evolving regulatory landscape.