Initiatives on capital announced by the Basel Committee

12 March 2009

Following its 10-11 March 2009 meeting, the Basel Committee on Banking Supervision announced that the level of capital in the banking system needs to be strengthened to raise its resilience to future episodes of economic and financial stress. This will be achieved by a combination of measures such as introducing standards to promote the build up of capital buffers that can be drawn down in periods of stress, strengthening the quality of bank capital, improving the risk coverage of the capital framework and introducing a non-risk based supplementary measure. Also, the regulatory minimum level of capital will be reviewed in 2010, taking into account the above and other relevant factors to arrive at a total level and quality of capital that is higher than the current Basel II framework. Strengthening the global capital framework in this manner will enhance confidence and lay the foundation for a more resilient banking system.

The Committee notes that current reactions in the market place regarding capital levels have been highly procyclical. It will not increase global minimum capital requirements during this period of economic and financial stress. Indeed, the Committee has earlier stated that capital buffers above the regulatory minimum are designed to absorb losses and support continued lending to the economy.