Basel IV and its impact on smaller regional banks, specifically with RWA calculations

asked by u/yan_p · 23d · 2 answers

I've been trying to wrap my head around the full implications of Basel IV, particularly how it's going to affect regional banks here in the EU, especially concerning the revised RWA calculations. My understanding is that the output floor could hit some of these smaller institutions harder than the major global players who already have more sophisticated internal models. I'm wondering if anyone has seen concrete data or early estimates on how significant this capital increase might be for institutions that don't have the same scale or buffer. Are we expecting a wave of consolidation, or are there specific strategies smaller banks are looking at to mitigate this?

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  • u/blee· 1 pts· 23d

    It's an interesting point about the output floor, feels a bit like kicking someone while they're already down, especially for banks without the resources to just throw at internal model development. Are we sure this isn't just a sneaky way to consolidate power in the bigger players?

  • u/mwhite· 1 pts· 23d

    You've hit on a key point regarding the output floor. While the intent is to level the playing field, it could disproportionately increase the RWA for banks reliant on standardized approaches, particularly those without the resources to optimize internal models under the new framework. It'll be interesting to see how the local regulators provide guidance on this for smaller institutions.

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