Almost half of bankers suggested that credit risk will be the most significant challenge of the Basel IV reforms, according to a new report by Wolters Kluwer’s finance, risk, and reporting (FFR) business.
The Basel IV Readiness Survey also highlighted the importance of using generated data to improve the efficiency and profitability of banking institutions.
Furthermore, around 90 percent of survey participants emphasised the need to integrate specific regulatory practice into business projections such as capital planning and budgeting.
Basel IV, a result of the Basel III finalisation reforms, is constructed around the two broad concepts of proportionality and interdependency, concerning which large institutions must tackle more demanding requirements and the influence of different types of risk against each other, respectively.
Over 75 percent of bankers in the survey cited that data management solutions should incorporate consolidation tests to verify whether simpler calculation methods are allowed under the proportionality doctrine.
According to 60 percent of survey participants, Basel IV compliance is anticipated to be a daily occurrence, with the majority of the remainder expecting a monthly obligation.
Inga Rottmann, vice president of marketing for Wolters Kluwer FRR, commented: “Credit risk indeed may be the most difficult matter to tackle in complying with the new framework, as the bankers surmise. Factors related to credit are key to a bank’s risk management efforts, profitability and overall health, a truth reflected in Basel IV’s more stringent and detailed requirements, down to individual deal level.”
She added: “The broad agreement on consolidation of financial accounts and the insistence that compliance data be used to inform business decisions and strategic planning reveal a strong appreciation for the need to integrate data management and operational capabilities.”
Wolters Kluwer FFR is helping its clients prepare for Basel IV by administering OneSumX, a centralised, integrated regulatory compliance and reporting platform to ensure consistency and address interdependencies.