What International Convergence of Capital Measurement and Capital Standards A Revised Framework Comprehensive Version requires
This framework presents the Basel Committee on Banking Supervision’s revisions to supervisory regulations governing the capital adequacy of internationally active banks. Its fundamental objective is to develop a framework that would further strengthen the soundness and stability of the international banking system while maintaining sufficient consistency that capital adequacy regulation will not be a significant source of competitive inequality among internationally active banks. The framework applies on a consolidated basis to internationally active banks, including any holding company that is the parent entity within a banking group, to ensure it captures the risk of the whole banking group. The revised framework is based on three pillars: minimum capital requirements, supervisory review, and market discipline. It retains key elements of the 1988 capital adequacy framework, including the general requirement for banks to hold total capital equivalent to at least 8% of their risk-weighted assets. A significant innovation is the greater use of assessments of risk provided by banks’ internal systems as inputs to capital calculations. The framework provides a range of options for determining the capital requirements for credit risk and operational risk to allow banks and supervisors to select approaches that are most appropriate for their operations and their financial market infrastructure.
Pillar: Banking & Global Finance · Authority: Basel Committee on Banking Supervision · Version: 1.0.0 · Last updated:
Primary source: https://www.bis.org/publ/bcbs128.pdf
SHA-256 integrity: ad4212e73d134017d6da3ef68ca9e4fd1a9bf559a591cce96b062027c6e2d9ad
Primary Citations — 8 traced to source
- Paragraph 5: The Committee is also retaining key elements of the 1988 capital adequacy framework, including the general requirement for banks to hold total capital equivalent to at least 8% of their risk-weighted assets...
- Paragraph 20: This Framework will be applied on a consolidated basis to internationally active banks. This is the best means to preserve the integrity of capital in banks with subsidiaries by eliminating double gearing.
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