Sovereign spreads marched higher again in the run-up to Basel III standards on bank capital adequacy.
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While concerns about capital adequacy were hanging over banks, shareholders were reluctant to rock the boat.
Some of those rules, such as the ones on banks' capital adequacy, already look dated.
Securities and Exchange Chairman Christopher Cox said that capital adequacy at the five largest U.S. investment banks was being closely watched.
It aims to increase the protect policyholders by imposing new capital adequacy measures.
Its biggest customers early on were central and commercial banks, which began using RiskMetrics' models to meet VAR-based capital adequacy requirements.
The rules for capital adequacy were set at global, European Union and United Kingdom level, and the FSA was required to work within them.
The emphasis on regulatory capital adequacy has short-changed economic capital, capital allocation and might hamper efforts to use capital efficiently to price risk, Chartis reported.
Top concerns were skewed toward regulatory compliance with capital planning, including capital stress testing followed by calculation of regulatory capital and regulatory capital adequacy reporting.
Mestchian said that many chief risk officers who were interviewed shared their pain around the sheer volume of regulatory requirements, especially in compliance and capital adequacy.
But MBf Finance apparently does not fulfill some of the other conditions of the central bank's CAMEL formula -- capital adequacy, asset quality, management efficiency, earnings performance and liquidity position.
In addition, Korean Finance Minister Lee Kyu Sung says the government will provide 50 trillion won by year's end to spur new lending and bring capital adequacy ratios to the 8% recommended for international banks.
Although the new Basel 3 global accords on capital adequacy are tough enough to have saved almost all banks during the crisis, a handful of firms worldwide, including HBOS, were outliers that lost far more than the average.
Of the many bad consequences of the TARP (bank bailout) scheme of 2008 and subsequent passage of the Dodd-Frank law (2010), one was the set of invasive new regulatory restrictions on executive pay, dividend-paying, and capital adequacy at U.S. banks.
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Enforcement will be the real challenge, assuming that all the cumbersome legislation goes forward on financial conglomerates, pensions, new capital-adequacy rules, risk capital for small businesses, clearing and settlement, accounting standards and insolvency rules.
And there could be a multiplier in respect of the creation of credit - because when banks lend via this form of so-called asset-backed finance, they are allowed by the capital-adequacy rules to allocate half as much of their precious capital resources as when providing overdraft loans.
That yields capital-adequacy ratios of about 11%, well above the 8% that international rules require.
Imagine: exempt from state and local taxes, they also have less onerous capital-adequacy requirements than private rivals.
They are also shedding assets at an alarming rate in order to meet EU capital-adequacy targets by next June.
The traditional shipping financiers are therefore pulling in their horns especially Japanese banks, which are also struggling to meet international capital-adequacy requirements.
More generally, it is possible that having two sets of capital-adequacy rules will distort competition between Basel 1 and Basel 2 banks.
Against that, though, new capital-adequacy rules due to take effect in 2006-07 will force Japanese banks to sell more of their holdings.
Indeed, their capital-adequacy requirement was reduced earlier this year so that they could make more of an effort to bolster the housing market.
Even those banks that are in good shape may want to hold back amid uncertainty over capital-adequacy requirements and accounting rules for off-balance-sheet assets.
The two loss-making banks, among several others, were forced to submit restructuring plans to the government by the poor level of their capital-adequacy ratios.
Of these, two international banks Yasuda Trust and Daiwa would have reported capital-adequacy ratios of less than 4%, a trigger under the new legislation for instant nationalisation.
Owned and controlled by the member central banks, the BIS provides them with data on capital flows and sets recommended regulatory standards such as capital-adequacy levels.
This risk is mitigated by the current moderate level of nonperforming loans (1.1% of total lending), larger provisions for bad loans, and more stringent bank capital-adequacy requirements in recent years.
High savings should ensure a healthy demand for bonds, which will also be snaffled up by Japan's distressed banks, as they cut their loan-books in the struggle to meet capital-adequacy requirements.
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