Deferral of Basel III Implementation – The Case to Comply Now

Basel III

On March 27, 2020, the Basel Committee’s oversight body, the Group of Central Bank Governors and Heads of Supervision, announced the deferral of the Basel III implementation (often referred to as Basel IV). The delay is intended to increase operational capacity for banks and supervisors to adequately respond to the COVID-19 pandemic. The implementation date of the remaining Basel III standards, which were due to come into force in January 2022, will now be delayed by a further year, giving a new implementation date of 1st January 2023. For European banks, the changing regulation is seen as industry best practice and compliance is a sensible ongoing initiative, regardless of the extended deadline.

With the large body of regulation banks are facing, it’s not surprising that compliance is often viewed as a hindrance and that extended deadlines would be welcomed. However, in our experience, many banks see compliance as a responsibility that needs to be taken care of promptly so they can focus on their core business – this is what Vox helps banks do. 

But beyond this, timely compliance represents a tremendous business opportunity – a way to invoke trust and confidence in an industry where trust is everything (the LSE’s famous motto, “my word is my bond,” is noble but perhaps outdated). A bank moving to comply with Basel III would indicate that it is committed not just to its shareholders and customers, but to the stability of the overall economy – a very positive message in these difficult times.

But compliance is far from easy. Basel III requires banks to assess risks, calculate capital, implement controls, monitor compliance, document findings, resolve issues and provide reports to regulators and Boards, which requires an investment of human and financial capital. While banks globally still face a big challenge to recover from the impacts of the pandemic, this is a timely reminder that deferral does not mean cancellation; the Basel III framework still needs to implemented. However, with the right solution framework, banks can not only ensure compliance, but can also reduce costs and enhance efficiency while doing so.

In a world of regulatory uncertainty, one thing we know for sure is that Basel III is not going away – compliance is mandatory! We’re here to help. Please contact Phil Marsden at  phil.marsden@voxfp.com to learn more.

Look out for our next post where we will explore the Standardized Approach for Counterparty Credit Risk (SA-CCR), a core component of the capital requirement framework under Basel III addressing counterparty risk.

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