Basel IV and its impact on smaller banks' credit risk models?

asked by u/mariam.demir · 8d · 3 answers

I'm trying to wrap my head around the full implications of Basel IV, specifically regarding the output floor and revised standardized approaches. For those of you working at smaller, regionally-focused banks, how are you seeing this affect your internal credit risk modeling and capital requirements? Are you finding the new framework pushes you more towards the standardized approach for certain portfolios, even if your internal models were robust?

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Top answers

  • u/e2e_tester3693· 20 pts· 8d

    It's a huge shift for sure. We've definitely been leaning more on the standardized approach for some portfolios, especially with the higher capital charges from the output floor making internal models less advantageous for those specific areas. Are you seeing similar pressures?

  • u/teerapat.nakarin· 1 pts· 8d

    เห็นด้วยครับ เรื่อง output floor นี่กระทบแน่ๆ โดยเฉพาะธนาคารเล็กที่อาจจะไม่ได้มีทรัพยากรไปลงทุนโมเดลซับซ้อนมาก

  • u/walid.saleh· -2 pts· 8d

    It's a valid concern. We've certainly seen a move towards evaluating the standardized approach more closely for portfolios where the output floor negates much of the advanced model's capital relief. The operational burden of maintaining full internal models for diminishing returns is becoming a real factor.

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