International standard setters’ approach to the appropriate design of regulatory bank capital requirements is currently in a state of flux. We examine the potential effects of recent Basel III and proposed Basel IV changes on the future role of risk sensitivity and internal models in capital requirements, competitive advantages from and incentives for banks to attain IRB status, and the implications for the Australian mortgage market. This is an abridged and revised version of a paper presented at the 20th Melbourne Money and Finance Conference.
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