An Overview of Basel III - Euromoney Conferences

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Re-Defining the Capital Base… The Basel III proposals redefine the composition of regulatory capital Under the proposals: – Focus on core equity – Innovative Tier 1 (with step-up feature) would not be recognised – Upper Tier 2 is abolished CHINA’S CURRENT BANK CAPITAL FRAMEWORK Lower Tier 2 Upper Tier 2 Core Tier 1 Tier 1 Overview of Bank Capital Structure INTERNATIONAL BANK CAPITAL FRAMEWORK Tier 2 Hybrid Tier 1 Core Tier 1 Tier 3 Lower Tier 2 Upper Tier 2 Innovative Tier 1 Non-Innovative Tier 1 Core Tier 1 PROPOSED BASEL III FRAMEWORK Tier 2 Contingent Capital Hybrid Tier 1 Core Tier 1 6
Update on Basel’s Minimum Capital Standards (Sept 2010) • On 12 September 2010, the Basel Committee announced the new minimum capital requirements. Final rules expected in Dec 2010 Minimum Capital Requirement • Minimum common equity ratio increases from 2% to 4.5% Total Capital 8.0% Common Equity (after deductions) 4.5% Tier 2 Hybrid Tier 1 Core Tier 1 Tier 1 Capital 6% Capital Conservation Buffer • Capital conservation buffer of 2.5% must be met with common equity (after regulatory adjustment) Total Capital 10.5% Tier 2 Common Equity Hybrid (after Tier 1 deductions) 7.0% Capital Conserv. Buffer Core Tier 1 Tier 1 Capital 8.5% 2.5% Countercyclical Buffer • A countercyclical buffer (0.0%~2.5%) of common equity or other loss absorbing capital will be introduced Total Capital 10.5~13.0% Common Equity (after deductions) 7.0~9.5% Tier 2 Hybrid Tier 1 Countercyclical Buffer Capital Conserv. Buffer Core Tier 1 Tier 1 Capital 8.5~11.0% 0.0~2.5% 2.5% 7
Page 1 and 2: An Overview of Basel III An evolvin
Page 3 and 4: Basel 3 & Bank Capital Definition o
Page 5: Basel III Consultation & Implementa
Page 9 and 10: New Definition for Tier 2 Instrumen
Page 11 and 12: Introduction of a Leverage Ratio…
Page 13 and 14: Existing Bank Capital Framework in
Page 15 and 16: Forms of Contingent Capital Example
Page 17: Disclaimer The Hongkong and Shangha

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