Basel 4 is the informal name for a set of 2017 proposals by the Basel Committee for calculating the amount of capital banks must hold relative to the risk they face. Basel 4 sets sweeping new rules on the weighting of credit, operational and market risks. That weighting matters for how banks calculate their capital ratios ('buffers'). The Basel 4 proposals aim to make banks' capital positions and capital charges more comparable internationally: how much capital do banks have as a minimum 'buffer' and does that amount of capital match the risks of products? The 2017 Basel 4 proposals are seen as the capstone of Basel 3: the international supervisory framework consisting of a package of measures taken after the 2008 credit crisis to strengthen banks' capital buffers. The Basel 3 measures are already enshrined in European legislation, with the introduction of Basel 4 expected to take place on 1 January 2025.
Asset-based financing
What we saw fairly soon after the financial crisis is that banks are increasingly starting to provide asset-based financing, as they then have more collateral (security) for the financing provided. Think of factoring and/or leasing. This will produce a better result in the risk calculation so that the financing will be accepted faster, but will also often be cheaper (lower interest rate).
Factoring
Factoring used to be seen as a necessary financing if nothing else, but now it is a modern financing tool which is interesting not only for SMEs, but also for corporate and even international companies. There will often be a requirement to also cover debtor risks with factoring through credit insurance, giving the bank more security.
Best terms and conditions
From 1 January 2025, when Basel 4 must be fully implemented, these asset-based finance products will become even more interesting. If you are planning to refinance, are looking for new financing or your bank is coming up with new proposals, the financial advisers will be happy to look with you to arrange your working capital financing on the best terms and conditions.
