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Basel III framework’s early days 

September 21, 2015

Nathan Stovall, Robert Clark, Banking Exchange

Basel III implementation pushed more banks into the undercapitalized ranks, but a few institutions were able to improve their financial position in the second quarter and back away from the abyss.

The number of undercapitalized institutions dipped slightly in the second quarter to 20 banks and thrifts from 21, based on the criteria of having a common equity Tier 1 ratio below 4.5%. But, many undercapitalized institutions reported notable improvement in their capital positions in the period, which marked the second quarter that banks and thrifts had to implement the Basel III rules.

Basel III basics

Under the Basel III rules, banks are considered to be undercapitalized if they have a total risk-based capital ratio of less than 8%, a Tier 1 capital ratio of less than 6%, a common equity Tier 1 ratio of less than 4.5% or a leverage ratio of less than 4%.

Read more: Banking Exchange

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