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Basel III and other regulatory changes

  • Basel Committee on Banking Supervision released final text of the Basel III framework in Dec 10 covering:

    • Revised capital rules

    • A new liquidity framework

  • Final text largely consistent with the press releases on 26 Jul and 26 Sep 10 by the Group of Governors and Heads of Supervision

  • The Basel committee also released further guidelines covering loss absorption of capital at the point of non-viability (‘gone concern’ measures) in Jan 11

    • These new requirements imply that no existing Australian Tier 1 hybrids will be eligible under Basel III

    • However, they are expected to be eligible for transitional arrangements. As such,10% will become ineligible annually beginning in 2013

    • Capital buffer levels have been specified

    • Countercyclical buffer of between zero and 2.5%, the latter to apply where excess credit growth exists in the economy

  • Minimum leverage ratio of 3% (i.e. maximum 33x leverage) to be reported from 1 Jan 15

  • Significant regulatory changes in other markets that we operate in

    • e.g. US Dodd-Frank Wall Street Reform and Consumer Protection Act

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