Financing for shipping companies will become more expensive and more difficult following the implementation of Basel IV regulations to banking institutions from January 1, 2025, members of the Shipping Department of the Hellenic Association of Treasurers (HAT) told “Naftemporiki”, pointing out that small and medium-sized shipping companies will feel the greatest pressure, while at the same time alternative financing sources, such as leasing companies, are expected to benefit.
“The new regulations will increase banks’ capital requirements, forcing them to hold larger capital reserves to cover loan risks. This means that banks will pass on the increased costs to shipowners, leading to higher interest rates and tighter lending conditions.
Consequently, financing for shipping companies will become more expensive and more difficult, affecting mainly smaller and medium-sized enterprises that depend on bank loans to secure capital,” the Association explained.
Meanwhile, major banks have either begun to gradually withdraw from shipping or are focusing on the few large companies, leaving the small and medium-sized shipowners, who are the majority of Greek shipping, facing significant funding challenges.
The new framework
“The reforms proposed in Basel IV promote changes in the way banks calculate and quantify risk-weighted assets, i.e. more simply the denominator of the regulatory capital ratio. The new supervisory framework foresees an increase in the risk weighting factors for some categories of exposures, limiting the use of internal risk weighting models which until now led to lower weighting factors compared to the corresponding factors of the standardized method, mandatory adherence to a leverage ratio and the adoption of new liquidity criteria,” Irini Sakellari recently wrote to “Naftemporiki”.
“The implementation of the framework marks a significant change in the banking landscape, as the methodologies for determining capital requirements will have to be revised. Capital calculations in all types of risk will be radically modified,” banking sources noted and added:
“Especially for the shipping industry, the emphasis on increased capital requirements and adjusted risk-weighted assets – shipping is considered a high-risk industry due to cyclicality and asset-backed lending – is expected to lead to a retreat of banks, reshaping the risk model.”
