G-20: New capital standards will be phased in over a timeframe that is consistent with sustained recovery and limits market disruption

The G-20 summit in Toronto took stock of the progress of the Basel Committee on Banking Supervision (BCBS) towards a new global regime for bank capital and liquidity and welcomes and supports its work. Substantial progress has been made on reforms that will materially raise levels of resilience of our banking systems.

1. The amount of capital will be significantly higher when the new reforms are fully implemented.

1. The quality of capital will be significantly improved to reinforce banks’ ability to absorb losses.

The G-20 supports reaching agreement, at the time of the Seoul Summit, on a new capital framework that would raise capital requirements by:

1. establishing a new requirement that each bank hold in Tier 1 capital, at a minimum, an increasing share of common equity, after deductions, measured as a percentage of risk-weighted assets, that enables them to withstand with going concern fully-lossabsorbing capital – without extraordinary government support – stresses of a magnitude associated with the recent financial crisis.

2. moving to a globally consistent and transparent set of conservative deductions generally applied at the level of common equity, or its equivalent in the case of nonjoint stock companies, over a suitable globally-consistent transition period.

Based on the agreement at the Pittsburgh Summit that Basel II will be adopted in all major centers by 2011, the G-30 agreed that all members will adopt the new standards and these will be phased in over a timeframe that is consistent with sustained recovery and limits market disruption, with the aim of implementation by end-2012, and a transition horizon informed by the macroeconomic impact assessment of the Financial Stability Board (FSB) and BCBS.

Toronto, June 27 th, 2010

WWW.TREASURYANDFINANCE.INFO

Source: G-20. WWW.G20.ORG


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