Discussion over Basel IV: Excessive Burden on European Banks or Still Too Lax?

There is still no end in sight to the debate over new banking regulations. The Basel Committee was supposed to finalise the last details of “Basel III” or establish “Basel IV” in a meeting at the beginning of January; but the meeting had to be postponed. There Proposals to further improve banks’ equity ratio have been hotly debated. Jochen Zimmermann, University of Bremen, has good reasons to oppose the Basel Committee’s demands that banks improve their equity position. In his view, the present regulatory model is not too lax, but does the wrong thing, and more of the wrong thing cannot be good. Stephan Paul, Ruhr-University of Bochum, advises the Basel Committee to pursue a closed concept for the further development of standards. Basel III does not meet present challenges and a comprehensive review of its shortcomings in the framework of a “Basel IV” is inevitable. Thomas Heidorn, Frankfurt School of Finance & Management, and Christian Schmaltz, Aarhus University, note that there has been one regulatory change after another since the financial crisis. It is time to stop regulating and allow consolidation in risk management to take its course. Risk managers need time to examine the potential individual risks of their institutes, “instead of racing to implement the latest regulatory change.” According to Michael Torben Menk, University of Siegen, different business models should be regulated in different ways. “Basel IV” would place an excessive burden on banks. Lothar Jerzembek, Association of German Public Sector Banks, sees a danger that German banks will no longer be in a position to provide services to German business, and especially to SMEs, should “Basel IV” be introduced. In such a scenario, they believe that foreign players would move into the German banking sector to an even greater degree and possibly partly take over. For Karen Braun-Munzinger and Korbinian Ibel, European Central Bank, by contrast, the successful finalisation of Basel III is important. If the banks are given enough time, they will be able to comply with tougher requirements. Clear international rules that can be fully and accurately implemented would be a help.