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The Bank for International Settlements has released the early details of their planned revamp of the international banking system, labelled Basel III and designed by the the Basel Committee on Banking Supervision.Here’s a brief rundown of what some of those new rules are. For full details, head to the BIS website and click on the Annex portion, for a full description of the new rules.
- Minimum Tier 1 leverage ratio of 3% for all banks
- The leverage ratio will begin to be monitored January 1, 2011. It will be tracked (tested) starting January 1, 2013 and last until January 1, 2017. The ratio must be disclosed as of January 1, 2015
- This gives banks until 2015 to truly get their leverage ratios in order, before they become public information. Though this could all change if the rules are decided to be too strict in the interim. Final rules will be put in place January 1, 2018.
- Rules on counterparty credit risk for financial debt held appear to be slightly weaker than expected (emphasis ours):
Keep the asset value correlation adjustment at 25% to reflect the inherent higher risk of exposures to other financial entities and to help address the interconnectedness issue, but raise the threshold from $25 billion to $100 billion