Steven Hall’s Post

https://lnkd.in/g4uyysNp The inevitable seems to be unfolding! I wonder how other jurisdictions are going to react to any potential changes to the U.S. Basel III endgame?! Will there be a greater push and emphasis towards cross border harmonisation or will this lead to a potential regulatory arbitrage? Only time will tell! #baseliii #bankingindustry

Check out this latest discussion, featured on Commercial Property Executive, on how the Basel III Endgame could reshape the role of banks in commercial real estate. Our very own Michael Heagerty, along with other industry experts, shares valuable perspectives in this must-read article. Full Article: https://lnkd.in/e9nvGeWC #Gantry #IndustryInsights #CommercialRealEstate #CRE #BaselIII #BankingRegulations #Finance #RealEstate

The UK's Prudential Regulatory Authority (PRA) on Sept. 12 unveiled amended rules for the implementation of the Basel III capital standards by domestic financial institutions, easing some key requirements and postponing the start of the framework's adoption by six months to Jan. 1, 2026. The PRA lowered capital requirements for banks' exposures to small- and medium-sized enterprises (SMEs) and infrastructure projects, as well as for their trade finance-related activities. The watchdog has also simplified how residential properties would be valued under the new framework to improve risk sensitivity in banks' mortgage valuations. Higher risk sensitivity could reduce the risk-weighted assets attached to the mortgage book and, with that, reduce the capital the bank would be required to hold against that book. #banks #basel

Good article on Basel III Endgame and its effect in CRE lending.

Interesting news that the Bank of England has delayed the updated Basel 'End Game' rules until after the summer. Given the impact that the new rules will have on Banks' capital and the time required to prepare/implement these, it is vital that there is clarity sooner than later. Given the upcoming introduction of an output floor to increase alignment between the internal ratings based approach and the standardised approach, banks should consider the use of an external rating where appropriate in order to maximise Risk-Weighted Asset efficiencies! https://lnkd.in/eFPDMEms #Basel #EndGame #RWA #RiskWeightedAsset #Ratings

💹 US Finance Watch: Navigating the Upcoming Basel III Endgame This morning, I delved into the significant changes looming for US banks as the Basel III Endgame approaches. With less than 18 months before the new regulations take effect on July 1, 2025, banks across categories 1-4 are bracing for a shift towards an expanded risk-based approach, aiming to enhance risk sensitivity. Implications for Business: 1️⃣ Higher Cost of Capital: Access to capital has been tightening, and this trend is expected to continue. The Basel III Endgame could introduce additional requirements for those seeking CRE loans, affecting accessibility and terms. 2️⃣ Increased Equity Requirements: To mitigate overall risk, banks are anticipated to demand higher equity contributions on deals, affecting financing structures and negotiations. 3️⃣ Deal Volume Adjustments: The CRE market may experience a slowdown in deal volume as it adapts to the heightened regulatory requirements imposed by banks. Discussion Point: How do you foresee these regulations affecting CRE transactions in the next 18-24 months? I encourage you to share your insights and strategies as we navigate these upcoming changes together.

https://lnkd.in/e35bxsfi I have been waiting for Mr. Bernanke’s report and evaluation. It is direct with all recommendations accepted by the Bank of England. My eye was drawn to the uncompromising final paragraph of the Executive summary (see below). The MPC have obviously had a very difficult job dealing with global shocks and the deficiencies of the Bank’s forecasting infrastructure. I also think it is a reminder of the importance in an uncertain and unpredictable world of having independent thinkers within the MPC, to challenge forecasts and conclusions, which will help guide us more smoothly through challenging times.   “Building and maintaining a high-quality infrastructure for forecasting and analysis The most serious problems we found in our review are the deficiencies of the Bank’s forecasting infrastructure – the tools the staff uses to produce the quarterly forecast and supporting analyses. Some key software is out of date and lacks important functionality. With the staff fully engaged in the production of the current forecast, particularly during periods of extraordinary volatility, insufficient resources have been devoted to ensuring that the software and models underlying the forecast are adequately maintained (updated, stress tested, and periodically re-estimated). In particular, the baseline economic model, known as COMPASS, has significant shortcomings. These deficiencies in the framework, together with a variety of makeshift fixes over the years, have resulted in a complicated and unwieldy system that limits the capacity of the staff to undertake some useful analyses, including producing alternative forecast scenarios, using information gleaned from forecast errors to improve model specifications and forecasting methods, and considering alternative modeling frameworks. A positive development is that an effort to upgrade the data management system is under way. This report describes the issues with the forecasting infrastructure and makes four recommendations.”

The #Basel_III reforms have led to considerable improvements in banks' capital adequacy, leverage ratios, and liquidity. But the new Committee Chair, Erik Thedéen, state in a recently maiden speech, that the work to fortify the banking sector against future crises is not done and outlines a comprehensive and well-considered approach toward guiding the #Basel_Committee’s ongoing work upon several guiding principles: Principle 1: Sail Forward but Always Glance Back The emphasis here is on #learning_from_history to prevent future banking crises. The Chair call to remember and act upon these lessons, especially in #novel_scenarios like synthetic risk transfers (#SRTs) and the #interconnection between banks and #non_bank #financial_intermediaries (NBFIs), underlines a proactive and prudent approach to banking regulation. Principle 2: All Hands on Deck Highlighting the essence of financial stability as a global public good, the Chair stresses the importance of cross-border cooperation to avoid regulatory fragmentation and a race to the bottom. By advocating for inclusive dialogue and collaboration—extending beyond traditional banking authorities to include sectors affected by #digitalisation, #climate_change, and more—the Chair calls for a holistic and coordinated response to global financial stability challenges. Principle 3: Keep Your Heading Steady Here, the Chair posits the Basel Committee as a lighthouse, providing guidance amidst the fog of financial uncertainty. The narrative emphasizes the role of bank regulation and financial supervision in supporting a resilient banking system that, in turn, underpins economic stability. Using the Swedish experience during the Covid-19 pandemic as an example, the Chair argues against diluting regulations for short-term gains, advocating instead for maintaining strong #capital and #liquidity buffers as a competitive advantage and foundational element of financial stability. Principle 4: Sailing to #Simplicity The final principle speaks to the balance between risk sensitivity, simplicity, and comparability in regulatory frameworks. It acknowledges the complexity inherent in banking and finance but warns against the perils of overly complex regulations that obscure risk understanding and impede effective supervision. The Chair advocates for #simpler, more #robust #regulatory_approaches that allow for clarity and effective #risk_management, suggesting that in the face of banking’s inherent uncertainties, simplicity could indeed be the superior strategy. https://lnkd.in/dVdyrusx

What does the Bank of England do? Further detail on the Bank’s objectives, as well as a full list of the operations considered in this report, can be found in the Bank’s Market Operations Guide. https://lnkd.in/ei8r5KxG