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Home Archive for category "Basel III – International" (Page 5)
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Davis Polk Blackline of Basel Committee’s Revisions to Basel III Leverage Ratio

[Detailed client memorandum to come.] We have prepared a blackline that compares the Basel Committee’s January 2014 final revisions to the Basel III leverage ratio to the June 2013 proposed revisions.  We will be publishing a client memorandum that discusses the key changes to the Basel III leverage ratio.

Background:  Today, the Basel Committee issued final revisions to the Basel III leverage ratio framework and disclosure requirements following endorsement by its governing body, the Group of Governors and Heads of Supervision (GHOS).…  Read More

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Basel Committee’s Oversight Body Endorses Revisions to Basel III Leverage and Liquidity Standards

Today, the Basel Committee’s oversight body, the Group of Governors and Heads of Supervision (GHOS), endorsed a number of important proposed and final revisions to the Basel III capital and liquidity standards, including:

  • Revisions to the Basel III leverage ratio, which are intended to reflect agreement on a consistent measure of leverage “to overcome differences in national accounting frameworks” and to maintain the leverage ratio as a “backstop” to risk-based capital requirements;
  • Proposed changes to the Basel III net stable funding ratio (NSFR), for which the Basel Committee has released a consultative document;
  • Final Pillar 3 disclosures standards relating to the Basel III liquidity coverage ratio (LCR);
  • Revisions to the Basel III LCR providing that committed liquidity facilities of a type already recognized for jurisdictions with insufficient high-quality liquid assets (HQLAs) may have a role to play within the LCR framework; and
  • The Basel Committee’s strategic priorities for the next two years, which include ongoing monitoring and assessment of Basel III implementation; further examining the Basel framework’s balance between simplicity, comparability and risk sensitivity; and improving effectiveness of supervision.
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Definition of High-Quality Liquid Assets: U.S. LCR Proposal vs. European Banking Authority Recommendations

We have prepared a high-level comparison of (1) the definition of high-quality liquid assets in the U.S. liquidity coverage ratio (LCR) proposal and (2) the assets found to be of extremely high liquidity and credit quality (extremely HQLAs) and of high liquidity and credit quality (HQLAs) in the European Banking Authority’s recent report on the uniform definitions of extremely HQLAs and HQLAs.  Pursuant to CRD IV, the European Commission will consider the European Banking Authority’s report for purposes of introducing a detailed and harmonized LCR requirement in the EU.…  Read More

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European Banking Authority Publishes Reports on Liquidity Coverage Ratio

Today, pursuant to CRD IV, the European Banking Authority (EBA) published two reports on the liquidity coverage ratio (LCR).  The first report concerns the appropriate uniform definitions of extremely high quality liquid assets (extremely HQLAs) and high quality liquid assets (HQLAs) and operational requirements for liquid assets.  The second report assesses the impact of an LCR requirement in the EU.  The two reports provide the European Commission with specific recommendations for the purpose of its forthcoming delegated act setting forth a uniform LCR requirement in the EU.…  Read More

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Basel Committee Issues Second Proposal on Risk-Based Capital Requirements for Securitization

Today, the Basel Committee issued a second proposal to revise the risk-based capital requirements for securitization exposures.  In developing the proposal, the Basel Committee took into account comments received on its first proposal and the results of a quantitative impact study (QIS).

Compared with the Basel Committee’s first proposal, the major changes in the second proposal relate to the hierarchy of approaches for securitization exposures and the calibration of capital requirements.

Proposed hierarchy of approaches.  The Basel Committee proposes the following hierarchy of approaches for determining the capital requirement for securitization exposures:

  1. Where banks have the capacity and supervisory approval to do so, they may use an internal ratings-based approach to determine the capital requirement based on the internal ratings based approach capital charge for the underlying pool of exposures, including expected losses.
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Basel Committee Issues Final Capital Standards for Equity Investments in Funds

Today, the Basel Committee finalized its revised risk-based capital framework for a bank’s equity investments in funds, which was proposed in July 2013.  The revised framework includes three approaches for calculating risk-based capital requirements for equity investments in funds (hierarchy of approaches), which are in decreasing order of risk-sensitivity.

Scope of Application:  The revised framework is applicable to banks’ equity investments in all types of funds that are held in their banking book, including off-balance sheet exposures (e.g., unfunded commitments to subscribe to a fund’s future capital calls).  …  Read More

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