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Basel IV May Seriously Damage the Rail Sector
The revision of the Basel III rules on prudential standards for banks will probably come into effect on 1st January 2025. The proposals represent a significant threat to the financing and development of the rail sector if, when implemented, they take no account of the additional security given to banks when they are lending secured against, or leasing, rolling stock. This will mean higher costs for the banks, the rail operators and the consumer.
The Rail Working Group has today issued a detailed position paper arguing for a more realistic assessment of the way that banks should risk weight their financings of railway equipment. “As we begin COP 27 and re-engage with the battle against climate change, with regulators encouraging banks to finance more environmentally friendly forms of transport – such as rail – it makes no sense at all to artificially increase banks’ cost of funds” said RWG Chairman Howard Rosen, “particularly when the Luxembourg Rail Protocol is operating, which will give banks enhanced security over financed railway equipment. The new proposed rules will reduce the availability and increase the costs of credit for operators at a time when more investment in rolling stock is urgently needed as railways play a critical role in post pandemic economic regeneration and regional integration,” he added.
