Basel III compliance with securities financing transactions

The purpose of this paper is to discuss compliant and optimised Basel 3 capital calculations for a bank,specifically focused on Securities Financing Transactions (SFTs). SFTs involve borrowing or lending securities in order to raise short-term financing, and they can make up a significant portion of a bank’s
risk-weighted assets (RWAs). As such, it is important that the calculators used to determine RWAs for SFTs are both compliant with the new Basel 3 regulations and accurately reflect the risk to which the bank is subjected (International Capital Markets Association, 2022).
In order to meet these requirements, the bank must update its existing calculators to ensure compliance with the new regulations and avoid overly punitive RWAs. This involves a thorough understanding of the new regulations and the specific requirements for different types of risk-weighted asset and leverage ratio calculations. It also involves working with technology to deliver these calculations, and testing
them with business users to ensure that they are fit for purpose and accurately reflect the risk to which the bank is subject (Bank for International Settlements, 2022).