Basel accord IV: What contribution and impact for the financial and banking industry in the era of COVID-19?

Abstract

The main objective of this article is to highlight the new Basel Accord 4, whose implementation of his recommendations will be spread over a period of 11 years (2017-2028) as well as its challenges and prospects after three decades of implementation of Basel regulations (since 1988). The context of this research comes particularly after the occurrence of subprime financial crisis in 2007 and also the health crisis that occurred at the end of 2019 which put the four corners of the world in endless turmoil.

In an uncertain and constantly changing environment, the purpose of enacting prudential rules is to strengthen the international banking system for all banks with significant international activity.

Since the international financial system must be adapted imperatively to any fundamental change, the economic turmoil of the post-global crisis of 2007 led international regulators to impose new regulatory constraints known as the Basel Accord 4. However, the Covid-19 pandemic emerged at the end of 2019, which gave rise to a new regulatory timetable and which imposed new measures and new implications for banks.

A few months before the start of implementation of this reform (initially planned for January 2022 and postponed until 2023 due to the health crisis), in this article we will focus on clarifying the changes made by this new Basel Accord by showing its contribution and impact on the financial system in view of the current international economic circumstances, particularly after the spread of Covid-19 which has impacted and disrupted the global economy. Nevertheless, the stakes are high for the banks, mainly because a global financial crisis could arise in the near future.

JEL Classification: G39

Paper type: Theoritical research