In December 2017, the Basel Committee announced the completion of the Basel III reforms. The long-awaited new agreement, referred to as Basel IV, sets the new global standards for capital requirements for banks, including the new standardized approach to credit risk. Of particular relevance to FMO is the proposed new capital treatment of equity exposures.
An essential part of FMO’s added value as a development bank is our ability to provide clients in developing countries with long-term capital.
Risks, opportunities & dilemmas
New regulations aim to make the banking sector more robust and better prepared for future crises. However, the proposed higher capital requirements for equity investments in Basel IV will limit our ability to provide clients with long-term capital, thereby having an effect on banks in developing countries and the use of financial instruments for economic development in these countries. As providing high-risk finance in developing countries is our core business we are challenged to define mitigating measures with the purpose to maximize our impact in responding to product demand from our clients.