Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

Section 2REGULATORY AND SUPERVISORY CAPITAL REQUIREMENTSFOR BANKSA. Qualitative informationCapital is the first and most important safeguard of a bank’s stability. Forthis reason, the international and domestic supervisory bodies have establishedrigorous rules for calculating regulatory capital and the minimum capitalrequirements with which banks are bound to comply. In particular, the ratiobetween risk-weighted assets and regulatory capital must not fall below 8%. TheBank of Italy has established a prudential level of 10%, which falls to 6% if onlyTier 1 capital is considered (the core Tier 1 ratio).Since its inception one of the distinguishing features of the MediobancaGroup has been the solidity of its financial structure, with capital ratios that havebeen consistently and significantly higher than those required by the regulatoryguidelines, as shown by the Internal Capital Adequacy Assessment Process(ICAAP) and the information disclosed to the public as required under Pillar IIIof Basel II, with the latter document published on the Bank’s website atwww.mediobanca.it.2.1 Scope of application of regulationsRegulatory capital has been calculated on the basis of Bank of Italy circularsno. 263 issued on 27 December 2006 (seventh update issued on 28 January2011) and no. 155 (thirteenth update issued on 9 February 2011), whichtranspose the new prudential guidelines for banks and banking groups introducedby the New Basel Capital Accord (Basel II) into the Italian regulatory framework.The Bank has opted for the “full neutralization” permitted by the Bank ofItaly in its guidance issued on 18 May 2010, whereby the valuation reserves forsovereign debt issued by EU member states and held as AFS financial assets canbe neutralized for the purpose of calculating regulatory capital.In July 2011 the draft regulations on banks’ capital and corporategovernance known as the Capital Requirements Directive (“CRD IV”) waspublished. This document represents the European Commission’s transposition ofthe new prudential guidelines for banks known as Basel III, which involve ageneral strengthening of the quality of regulatory capital. The new regulationsshould be ready by end-2012 and applied gradually starting from January 2013,becoming fully operative as from 2019.– 221