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Implementing Basel III

Over ten years have passed since the financial crisis of 2007-2009 exposed deficiencies in the international regulatory framework for banks. One might think the task of strengthening the regulation, supervision, and risk management of banks would be completed by now.

However, while there has been a vast amount of regulatory change, we are only just getting into the final stages of the implementation of the resulting reforms in Europe.

In December 2017, the Basel Committee (Basel) issued its final package of changes for implementation in 2022. This package, known as the Basel III Reforms (the Reforms), is wide reaching and represents a fundamental change to almost every part of the capital and risk weighted asset (RWA) regime, significantly reducing banks' ability to model certain portfolios. As such, widespread changes to RWA engines, reporting, and disclosures are required. However, the Reforms are not legally binding in their own right. They have to be implemented via national legislation.