By Lukas Becker
Published March 4, 2013 Risk
Banks have had more than two years to peruse the Basel III prudential rules since they were finalised in December 2010, but the impact of one footnote – which transfers the volatility of huge, previously exempt bond portfolios into bank capital numbers – is only now beginning to sink in.
Paragraph 52 of Basel III lists what banks must include in common equity Tier I. This number, when divided by risk-weighted assets, produces the all-important common equity Tier I ratio, which is subject to a new 4.5% minimum plus a range of add-ons that are expected to establish an effective industry standard of around 10% for larger banks.
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