Basel III and Capital Requirements Directive (CRD) IV will increase the quantity and quality of capital held by Irish subsidiary banks and investment firms while presenting significant liquidity and leverage challenges for the Irish banking industry.
Understanding and preparing for these challenges will drive the key strategic and operational decisions required to consolidate and build competitive positioning.
Deloitte assists in this focus by drawing upon an experienced local and international network, which is able to address both the strategic and business impacts of CRD IV.
Basel III refers to a set of changes that the Basel Committee on Banking Supervision (Basel Committee or BCBS) is intending to make to its Basel Capital Accord to strengthen the global banking system.
CRD IV stems from the European Union’s implementation of Basel III and will create a single rule book for the European banking industry. Building upon previous Capital Requirements Directives, CRD IV will reduce the discretionary approach by individual member states in the areas of capital requirements and liquidity management. Due for publication in 2012, CRD IV includes increased governance and sanctions for non-compliance which will apply to banks, investment banks, securities firms and most investment firms.
CRD IV proposes to:
CRD IV poses fundamental challenges to existing business models within the Irish banking industry, raising questions around product strategy, the ‘efficient’ use of capital and liquidity.
As a result the industry is now focused on moving away from a blanket view of capital requirements to a precise one. The following areas should be considered:
|Capital and liquidity management||Business Management|
|Capital management structure||Management information and reporting|
|Liquidity buffer||Product development, cost of funds and transfer pricing|
|Strategy for deleveraging||Business model efficiency|
|Risk Management||Performance management and measurement|
|Credit Value Adjustment||Capital based performance measure|
|Capital optimisation||Evolution of funding mix|
|Risk identification and governance||Return matrix model optimisation|
Response to CRD IV
Clients are responding to CRD IV by setting up and conducting GAP analysis programmes and assessing end-to-end implementation requirements.
Deloitte Ireland has a wide network of experience in this area and has engaged with a number of international banks and investment firms in developing successful and innovative solutions. We have a dedicated team with international experience of capital requirement related engagements, Basel II, Basel II.5 and can provide financial service covering accounting risk process, strategy, performance measurement and IT solutions.
The Deloitte impact assessment will address:
Please contact John McCarroll or David Dalton for information on a Deloitte Basel III impact assessment, or to enquire about our training workshops on Basel III/CRD IV.