Strengthening the resilience of the banking

Basel Committee on Banking Supervision

Consultative Document Strengthening the resilience of the banking sector
Issued for comment by 16 April 2010

December 2009

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© Bank for International Settlements 2009. All rights reserved. Limited extracts may be reproduced or translated provided the source is stated.

ISBN 92-9131-810-8 (print) ISBN 92-9197-810-8 (online)

Contents
I. Executive summary .........................................................................................................1 1. 2. Overview ofthe Basel Committee’s reform programme and the market failures it addresses...............................................................................................................1 Strengthening the global capital framework ...........................................................4 (a) (b) (c) (d) (e) 3. 4. II. 1. Raising the quality, consistency and transparency of the capitalbase.........4 Enhancing risk coverage...............................................................................5 Supplementing the risk-based capital requirement with a leverage ratio......6 Reducing procyclicality and promoting countercyclical buffers.....................7 Addressing systemic risk and interconnectedness .....................................10

Introducing a global liquiditystandard..................................................................11 Impact assessment and calibration......................................................................12 Raising the quality, consistency and transparency of the capital base ................13 (a) (b) (c) (d) (e) (f) Introduction.................................................................................................13 Rationale and objective...............................................................................14 Key elements of proposal ...........................................................................15 Detailed proposal ........................................................................................17 Criteria governing inclusion in the Common Equity component of Tier1 ...18 Disclosure requirements .............................................................................27

Strengthening the global capital framework ..................................................................13

2.

Risk coverage ......................................................................................................27 Counterparty credit risk........................................................................................28 (a) (b) (c) Introduction .................................................................................................28 Key problems identified...............................................................................28 Overview of Recommendations..................................................................29

Addressing reliance on external credit ratings and minimising cliff effects ..........55 3. Leverage ratio ......................................................................................................60 (a) (b) (c) (d) 4. (a) (b) (c) (d) Capital measure..........................................................................................61 Exposuremeasure......................................................................................62 Other issues................................................................................................65 Summary of the baseline proposal for a leverage ratio ..............................65 Cyclicality of the minimum requirement ......................................................66 Forward looking provisioning...