Updates ( Basel IV)

Basel sector is currently working on issuing new discussion papers and models of Quantitative Impact Study (QIS) under the framework of updating Basel III (Basel IV) with the aim of preparing banks operating in Egypt to implement these improvements as of January 1st 2022, and to check possibility to apply the following adjustments:
First: Addressing weaknesses in how credit risk being calculated by developing a new standardized approach framework with a view to reaching more risk-sensitive measurement methods and internal rating approach where the Basel Committee has abolished some internal rating methods in order to reduce reliance on them.
Second: To launch a new approach of measuring the amount of regulatory capital charged for operation risk, which would replace the four methods included in the previous framework, in order to achieve simplicity and easier methodology to implement.
Third: Invents an additional support for the leverage ratio to be added to the ratio of the local domestic systemically important banks- D-SIBs with some adjustments to the criteria of measuring some exposures by the leverage ratio.
Fourth: Exclude the internal model of calculating the capital charge for Credit Valuation Adjustment CVA, and replacing it with two other methods: basic indicator and standardized approaches.
Fifth: Setting up an output floor on the weighted average assets for those banks who use internal models for measuring their capital charge, the rationale is to limit possible releases on regulatory capital compared to standardized approach.