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By Morrison & Foerster LLP
Excerpt: 2011 Emerging
SUMMARY: This commentary summarizes
the new global minimum capital standards under Basel III.
September 12, 2010, the Group of Central Bank Governors and Heads of
Supervision, the oversight body of the Basel Committee on Banking Supervision
("BCBS"), issued a press release announcing a substantial
strengthening of the capital requirements, and its full endorsement of the
agreement it had reached on July 26, 2010 in relation to the proposed reforms
to the Basel II framework. These elements are intended to form part of a
package of reforms to be known as Basel III.
The press release contains a table summarizing the new requirements on minimum
regulatory capital and buffers, as well as a timetable for phasing in the new
The New Capital Requirements
Minimum common equity and Tier 1 capital requirements
The minimum requirement for common equity, the highest form of loss-absorbing
capital, will be raised from the current 2% to 4.5% of total risk-weighted
assets ("RWAs"). The overall Tier 1 capital requirement, comprising
not only common equity but also other qualifying financial instruments, will
increase from the current minimum of 4% to 6%.
There will be no change to the minimum total capital requirement, which will remain
at the current 8% level. ...
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About the Authors:
Peter Green, a partner at Morrison & Foerster, focuses primarily on
structured credit and structured products transactions. He represents
investment banks, issuers, investors and other providers of financial services
in relation to public offerings and private placements of debt instruments. He
has advised in relation to the unwinding and restructuring of a number of such
Jeremy Jennings-Mares is a partner in the Morrison & Foerster's
Capital Market practice. His practice specializes in structured products,
derivatives and structured financings, including structured notes, derivatives,
and medium-term note programs and other cross-border debt securities offerings.
He is a contributor to Covered Bonds Handbook, published by Practicing
Law Institute (2010).
Oliver Ireland, a partner at Morrison & Foerster, focuses on retail
financial services and bank regulatory issues including consumer protection
rules such as Federal Reserve Regulations Z and E, the Gramm-Leach-Bliley Act
privacy provisions, the Fair Credit Reporting Act, and all types of payment
transactions, including compliance with NACHA rules. He was named one of
Washington's top banking and privacy lawyers by the Washingtonian
magazine (2004) and he has been listed in The Best Lawyers in America as
a leader in the field of banking law since 2006.
Anna Pinedo, a partner at Morrison & Foerster, has concentrated her
practice on securities and derivatives. She represents issuers, investment
banks/financial intermediaries, and investors in financing transactions,
including public offerings and private placements of equity and debt
securities, as well as structured notes and other structured products.