The Swiss Financial Market Supervisory Authority (FINMA) published a circular that redefines the capital adequacy requirements for banks under Pillar 2 of the Basel Capital Accord.
The circular serves to replace the overall 20 percent safety margin of the minimum requirements in place until now with a differentiated regime that reflects and fleshes out current supervisory practice. Based on the new regime, the capital buffers required by FINMA are structured according to objective criteria and are risk-based. The capital buffers required are aligned with each institution's size, as well as the nature and complexity of its operations. They are to be made anticyclical.
The new regime will not trigger a need for new capital for most institutions. Rather, the circular sets down a higher lower limit for their capital base.
The circular will be effective starting July 1.
© FINMA (Swiss Financial Market Supervisory Authority)
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