The Committee is taking measures to mitigate any excess cyclicality of the minimum capital requirement and promote a more forward-looking approach to provisioning; strengthening capital quality and introducing a leverage ratio.
The Committee is taking measures to mitigate any excess cyclicality of the minimum capital requirement and to promote a more forward-looking approach to provisioning; strengthening capital quality and introducing a leverage ratio.
The package is part of the Basel Committee's broader program to strengthen the regulatory capital framework. The program aims to introduce new standards to
· promote the build-up of capital buffers that can be drawn down in periods of stress,
· strengthen the quality of bank capital and
· introduce a leverage ratio as a backstop to Basel II.
Under this program, the Committee is taking measures to mitigate any excess cyclicality of the minimum capital requirement and to promote a more forward-looking approach to provisioning. It will issue a consultative proposal on this broader program by the first quarter of 2010. The Committee is also requiring that banks conduct more rigorous credit analyses of externally rated securitisation exposures.
Banks and supervisors are expected to begin implementing the Pillar 2 guidance immediately. The new Pillar 1 capital requirements and Pillar 3 disclosures should be implemented no later than 31 December 2010.
The Committee also agreed to keep in place the Basel I capital floors beyond the end of 2009.
© BIS - Bank for International Settlements
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