Insights on capital shifts, credit risk sizing and concentration, and effective compliance
Safety and soundness will continue to be paramount assessment, particularly amid changing economic environment—expect capital changes, a focus on credit risk and the need to demonstrate compliance with key effective dates.
Explore here insights on Credit and Capital from the KPMG report Ten key regulatory challenges of 2023.
Developments on the prudential front will quicken with the release of the final Basel III ‘endgame’ rule draft. Along with this, updates to the capital and leverage ratio regimes for large banks are also likely to be acted upon in 2023. Supervisory expectations on climate risk will continue to intensify related to data and risk management practices, while societal elements such as fairness and inclusion will gather pace, with modernization of the Community Reinvestment Act likely.
Managing Director, North American Banks, Fitch Ratings
The federal banking agencies (FRB, OCC, and FDIC) have indicated they will examine capital tools and how those tools support the resilience of the financial system, both at individual financial institutions and in combination. The FRB has stated that when calibrating capital requirements, the agencies will work to “minimize unintended consequences, limit opportunities for gaming, and avoid excess compliance costs that do not result in risk reduction.”
Capital changes being considered for large banking organizations include:
In addition, persistent inflation, recessionary trends, and changing interest rates could drive strategic capital shifts, pushing companies to consider:
Changing economic conditions and the ability of the financial service sector to quickly measure, assess and factor changes into business processes will be a continuing focus for the regulators relative to credit risk sizing and concentration risks. Specific areas of focus will include:
Regulators will be looking for companies to demonstrate compliance on several examination priorities, including LIBOR conversion, resolvability, and liquidity.
Ten Key Regulatory Challenges of 2023
Read our report for client perspectives, regulatory recaps, and actionable steps to help mitigate risk.Download PDF