Professor Moorad Choudhry, chairman, of DCRO Institute’s supervisory board,  noted that Basel III and IV have made regulations overly complex and burdensome for banks. “It’s counterproductive if banks have to spend more time on regulatory compliance than anything else,” he said, advocating for a more streamlined regulatory approach.

They discussed the growing resistance from major economies, particularly the US and China, to what Choudhry described as "an increasingly sophisticated, complex, onerous, and prescriptive international regulation regime." This pushback is driven by concerns over the stringent Basel requirements, particularly regarding liquidity management and capital adequacy, amid the rapid digital transformation of the banking sector exemplified by the collapse of institutions like Silicon Valley Bank.

They discussed the evolution of the Basel regime, from Basel I’s focus on asset-liability mismatches to Basel II’s introduction of risk-sensitive requirements, and Basel III’s stricter capital and liquidity provisions.

With Basel IV adding even more complexity, Choudhry called for a return to simpler regulatory principles. Liquidity risk management, Choudhry noted, had been a pillar of banking for over 500 years, long before Basel's existence. He called for a return to straightforward regulatory principles for greater efficiency.

He also highlighted the need for banks to adopt technology to meet regulatory demands. “We should establish a baseline of good standards and practices for banks that doesn’t become so onerous that individual nation-states start pushing back,” he said.

Other discussion points:

• Basel I addressed asset-liability mismatches; Basel II added risk-sensitive requirements, and Basel III introduced stricter capital and liquidity provisions. Basel IV brings further complexity.
• Liquidity risk management has been a cornerstone of banking for centuries, predating Basel's establishment.
• Outdated data systems in many banks are inadequate for real-time liquidity and risk management.
• The rise of decentralised finance (DeFi) is reshaping traditional banking, with a shift in liquidity and risk management practices.
• The speed of financial transactions in a digital economy presents new regulatory challenges.
• Digitalisation, with rapid online transactions, poses fresh hurdles for liquidity management, as seen in Silicon Valley Bank’s collapse.how quickly things can unravel in the digital era.
• Banks to take more responsibility for managing their own risks, rather than relying on overly complex regulatory models.