Basel IV: Quantitative Impact Study on Cyprus Banks
Our most recent publication examines the impact of Basel IV on Cyprus Banks. In particular, this article focuses on the updated Credit Risk assessment framework.
Our analysis indicates that Cyprus Banks are expected to have a reduction in capital requirements as a consequence of the revised risk-weights assigned to specialised lending and the introduction of a risk-sensitive Loan-to-Value (LtV) based approach for real estate exposures.
Even though the overall credit risk framework under Basel IV is generally in line with Basel III, it includes a number of enhancements for specific credit portfolios that will impact certain business and products.
Fully understanding the changes and their impact is, therefore, crucial to adequately re-defining Banks’ capital plan, and consequently their business strategy.
Without this understanding, inappropriate allocation of capital requirements may occur, resulting in a skew in lending, potential mispricing of products and increased cost to customers.
Download the report for an analysis of the impact of Basel IV on the Banking-book credit risk requirements, as well as guidance on how to strengthen the bank management’s decisions around the matter.