Optimising returns under Basel 3.1

How to thrive and not just survive in a post-Basel 3.1 environment

One of the most pressing problems for the banking sector, and indeed for the wider global economy as a whole, is how to solve ‘the returns dilemma’. The causes of this are many and varied but one of the key contributors to this overall outlook must be the significant and seismic changes in bank capital and funding requirements over the last decade from Basel 3. And of course, banks are now facing into the next stage of this journey with Basel 3.1 (also known as “Basel III: Finalising post-crisis reforms”, “Basel III Endgame” and “Basel IV”) – a set of reforms which will again reshape the banking landscape and will exacerbate the ‘returns dilemma’.

So what is Basel 3.1 and, more importantly, what can banks do about it?

Alec Innes

Partner, Financial Risk Management

KPMG in the UK

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Our report explains the biggest change from Basel 3.1 - the Output Floor - and how to effectively manage it. Based on our experience and deep expertise in the banking sector, we also explain the three key and practical areas where we think banks need to focus, and invest in, to manage the reforms:

Embed capital-sensitive performance measures;
Accelerate balance sheet velocity; and
Centralise control of financial resource management and allocation.

Together these steps will allow banks to thrive and not just survive in a post-Basel 3.1 environment.

If you would like to discuss the changing regulatory environment and what it means for your bank's management of financial resources please do not hesitate to get in touch with our team.

Optimising returns under Basel 3.1

Basel 3.1 (also known as “Basel III: Finalising post-crisis reforms”, “Basel III Endgame” and “Basel IV”) is the latest in a series of banking reforms. Based on KPMG’s experience and deep expertise in the banking sector, we have identified three key and practical areas where we think banks need to focus, and invest in, to manage these reforms, including the Output Floor.

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