Basel IV a key challenge for under pressure banks
Written by Scott Thompson
Sixty one per cent of equity analysts who cover global capital markets institutions expect regulatory pressures on banks to intensify further through 2020. Potential new capital rules, informally known as Basel IV, are likely to have the greatest effect on their operations, finds a global survey of 150 buy-side and sell-side analysts by Broadridge Financial Solutions.
According to the report, Restructuring for Profitability, 68 per cent of analysts believe regulation has made the financial system safer. But they are also concerned about "regulatory creep" and its potential impacts on the industry. Although so-called Basel IV rules are still under discussion, 72 per cent think these rules will have the biggest regulatory impacts in the next five years. Among European analysts, 87 per cent held this view. US analysts surveyed are primarily concerned with the future effects of annual stress tests (cited by 77 per cent). Seventy eight per cent expect regulations to disrupt equity-trading business models over the next five years. Ninety two per cent said that FICC trading business models will be disrupted, including 28 per cent of analysts who characterise these changes as "dramatic."
"Regulation has imposed tougher capital rules on banks, creating pressure on traditional models," says Broadridge senior vice president of strategy Vijay Mayadas. "This means that banks will need to explore more creative ways to realign their operations and employ more transformative measures to reduce costs."