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

Section 2Regulatory and supervisory capital requirements for banksCapital is the first and most important safeguard of a bank’s stability. For thisreason, 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 a distinguishing feature of Mediobanca has been thesolidity of its financial structure, with capital ratios that have been consistentlyand significantly higher than those required by the regulatory guidelines. Suchsurplus capital is justified by the nature of the Bank’s operations on corporatemarkets.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 and no. 155 (thirteenth update) issued on 5February 2008, which transpose the new prudential guidelines for banks andbanking groups introduced by the New Basel Capital Accord (Basel II) into theItalian regulatory framework.The Bank has opted for the “full neutralization” permitted by the Bank of Italyin 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 corporate governanceknown as the Capital Requirements Directive (“CRD IV”) was published. Thisdocument represents the European Commission’s transposition of the newprudential guidelines for banks known as Basel III, which involve a generalstrengthening of the quality of regulatory capital. The new regulations should beready by end-2012 and applied gradually starting from January 2012, becomingfully operative as from 2019.– 421