Learn about end-to-end process From Data Integrity & Lineage to Finance & Risk Management, including credit

& market risk, operational,

Basel III vs Basel IV settlement, credit valuation adjustment, and counterparty credit risk. Not only can OneSumX for Basel IV's technology and expertise ensure
you comply with the Basel IV deadline and reporting obligations, but your teams can make timely, informed decisions to manage risk more
effectively, and optimize revenues.

11
Due Diligence 1
Basel IV
Exposure to Corporates
Basel III

Basel IV : An Overview Not Present in Basel III Banks must take reasonable and adequate steps to assess the
operating and financial performance levels and trends through
Basel III Basel IV
Splitting Corporates in General Corporates & Specialized Lending

OneSumX for Basel IV

Claims on rated corporates including
10 internal credit analysis. insurance companies. Floor for identification of SME Corporates - Consolidated annual sales of
SCRA Grading
for Banks
Due diligence should, to the extent possible, be performed at Supervisors on national discretion can assign corporate counterparty <= €50 million
the solo entity level (with support of group or potential risk of RW more than 100% For jurisdictions that do not allow external ratings RW for “investment grade”
Basel III Basel IV group) to which there is a credit exposure. corporates is 65%, SME corporates is 85% and others is 100%
Not Present in Basel III SCRA Grade A - Grade A refers to exposures to banks, where the Exception -Due diligence does not apply to: Due Diligence requirements apply
counterparty bank has adequate capacity to meet their financial Sovereigns
commitments in a timely manner. Non-central government public sector entities (PSEs) 2
SCRA Grade B - Grade B refers to exposures to banks, where the counterparty
bank is subject to substantial credit risk, such as repayment capacities that are
Regulatory to Retail Exposure
dependent on stable or favorable economic or business conditions.
SCRA Grade C – Not Grade A and B. Grade C refers to higher credit risk exposures Basel III Basel IV
to banks, where the counterparty bank has material default risks and limited 75% RW for exposures qualifying as regulatory retail Splitting of regulatory retail into:

REGULATORY
margins of safety. Regulatory retail Qualification Criteria:
Orientation criteria – Exposure to person(s) or small
Regulatory retail (non-transactors) – Follow same
Regulatory retail Qualification Criteria as in Basel
Projections for business and ILAAP/
ICAAP
TIER 1 to 4

COMPLIANCE- business Regulatory retail (transactors) – facilities where balance is

Product criteria – Revolving credit, line of credit paid at each scheduled repayment date or no OD
CALCULATION +
REPORTING Basel Calculation And Regulatory Reporting 9 (e.g., credit cards, ODs), Personal loans & small
business facilities (excluding mortgages)
drawdowns for last 12 months
Other Retail – all, except, Regulatory retail (non-transactors)
Off Balance Sheet Granularity criteria – Aggregated exposure per & Regulatory retail (transactors)
100% Banks Need Each Of The Component Basel IV counterparty <0.2% of overall regulatory retail
Basel III
Off-Balance Sheet items converted to No maturity-based treatment for commitments. portfolio
Low Value Criteria – Maximum aggregated retail
Stress testing and projecting
credit exposures by using CCF. Specific Rules for calculation of credit equivalent amount of OTC
Specific Rules for calculation of credit derivates. exposure <= €1 million
liquidity (ILAAP)
equivalent amount of OTC derivates. A bank providing credit protection through a first-to-default or
second-to-default credit derivative is subject to capital

REG.
requirements on such instruments.
RWs for first to default credit derivates can be aggregated up to
3
Real Estate Exposure Class
COMPLIANCES +
PROJECTION
a maximum of 1250% multiplied by nominal amount.
Similar treatment for second or nth to default credit derivative Basel III Basel IV Saving time and cost by using
TIER 1 to 2

where asset with lowest risk weight can be excluded

(BUSINESS,STRESS
Support Business Scenarios + Integrated
Classifies real estate exposures as
Residential property & Commercial
Real Estate Classification
1. Regulatory real Estate
automation to speed up prudential
PLANNING)
Risk Stories property Regulatory residential real estate exposure not materially
risk reporting
8 ed Cred
diz
Residential property - Lending fully dependent on cash flows generated by the property.
Important For Risk Function + Larger Banks i
ar
secured by mortgages on residential Regulatory residential real estate exposure that are materially
Subordinated Debt property that is or will be occupied by the dependent on cash flows generated by the property.

tR
d
borrower, or that is rented Regulatory commercial real estate not materially dependent on

Stan
Basel III Basel IV

isk
RW for Residential property is 35% cash flows generated by the property.
Not a separate asset class, standard RW of
100% applies
RW of 150% to subordinated debt and capital
instruments threshold other than equities.
Commercial Real Estate Regulatory commercial real estate that are materially dependent Projections within the same solution
RW for Commercial Real Estate is 100% on cash flows generated by the property.
2. Other real Estate
3. Land acquisition development and construction (ADC) exposures.

V
Ba

lI
sel se
REG. 7 III v s B a Usage of exact regulatory metrics
COMPLIANCES Equity
+CONSOLIDATION
Basel III Basel IV
Regulatory Residential Real Estate – Not Materially dependent on (not proxies) in business projection
TIER 1 to 2

(PRUDENTIAL + cashflows from Property

Prudential Consolidation + Wide View Whole loan approach and Loan Splitting approach for RW 2. Other real Estate scenarios (stress, testing, forecasts,
FINANCE) Standard RW of 100% Standard RW of 100%
Loan Splitting Approach (Not Materially dependent on cashflows) Exposures to individuals – 75%
Important For Larger Banks + Finance RW of 400% to speculative unlisted equity exposures

Function
RW of 250% to all equity holdings except equity investments in funds;
Splitting tranche 1 - Risk weight of 20% is applied to the part of the
exposure up to 55% of the property value (based on Lien)
Exposures to SMEs 85%
RW of 150% for exposures materially dependent on cash flows
ILAAP, ICAAP) and for deal decision-
100% RW based on national discretion.
Equity investments in Funds:
Splitting tranche 2 – RW of counterparty to residual amount from
Splitting tranche 1
generated by property.
3. Land acquisition development and construction (ADC) exposures.
making
New approaches which include counterparty credit risk (CCR) as well Exposures to individuals – 75% Criteria 1 – RW of 100% based on Underwriting & Legal pre-sale
Look Through Approach (LTA) – most granular & risk sensitive – treats Exposures to SMEs 85% or pre-lease contracts
exposures as directly held by bank Regulatory Residential Real Estate – that are Materially dependent on Fallback RW 150% if criteria 1 does not met
Mandate based Approach (MBA)– uses information in equity fund’s cashflows from Property
mandate
Fall-back Approach – RW of 1250%
Partial use of these approaches are allowed based on certain qualifying
criteria 4
Leverage adjustment can be applied Exposure to Banks

Why Choose OneSumX for Leverage ratio – Total assets/Total Equity

Using LTA & MBA banks can use the formula
Capped at 1250%
Basel III
National supervisors to apply 1 approach
Basel IV
2 Approaches – ECRA (based on external ratings, similar to Option 2 in
Basel IV Brief
consistently for all banksa Basel 3) & SCRA (for unrated banks & jurisdictions that don’t allows

Finance, Risk and Regulatory 5

Reporting ?
Long Successful Track Record in Basel
and EU regulation support solutions
Unique single focus on Compliance for
Finance, Risk and Reporting
Integrated Finance, Risk & Reporting
Approach for Reconciliation by Design
Solid organization, expertise and people
to support your “Basel IV” journey
6 sovereign of that country
Exposure Multilateral Development
Banks (MDS)
Basel III
6 RW buckets, Based on option 2
applied for banks asset class
No use of short term RW allowed
0% RW for highly rated MDBs based on
BCBS criteria
Basel IV
6 RW buckets
No use of short term RW allowed
0% RW for highly rated MDBs based on BCBS criteria
50% RW for Banks incorporated in jurisdictions that do not allow
external ratings for regulatory purposes
Exposure to Covered Bonds
Basel III
This asset class was not present in Basel 3
Treatment was similar to Banks exposure
class in Basel 3
Risk weight one category less favorable
than that assigned to claims on the
external ratings)
SCRA Approach requires banks to classify bank exposures into one of
three risk-weight buckets (i.e. Grades A, B and C) and assign the
Basel IV is a regulatory framework that helps
banks meet goals beyond regulatory
corresponding risk weights
Exception - claims on banks in countries
'Base' Risk weight of Grade A is 40%, Grade B is 75% and Grade C is
with sovereigns rated BB+ to B- and on
Basel IV
Covered bonds are bonds issued by a bank or mortgage institution that are
banks in unrated countries RW will be
capped at 100%.
150%
Whereas the Risk weight for short term exposure of Grade A is 20%, compliance.
subject by law to special public supervision designed to protect bond holders.
Grade B is 50% and Grade C is 150%
To comply, banks are being called on to
Eligible Assets
Claims on, or guaranteed by, sovereigns, their central banks, public sector
entities or multilateral development banks examine risk in creative and demanding
Claims secured by residential real estate that meet the specific criteria and LTV
<= 80% Option 2 – Based on external rating of the bank ways that forces them to rethink their
Claims secured by commercial real estate that meet the specific criteria and LTV Special treatment (except loans which already have
<= 60%
Claims on, or guaranteed by banks that qualify for a 30% or lower risk weight.
150% RW)
Unrated long term – 50%
strategies and business models.
(capped at 15% of covered bond issuances)
Floors
Unrated short term (original maturity <=3 months) –
20% This ultimately allows them to enhance
Nominal value of pool of assets by its issuer should not exceed nominal
outstanding by at least 10% growth, competitiveness and profitability - if
Minimum disclosure requirements
they manage their organizations and their
data well.