Proposal to ensure the loss absorbency of regulatory capital at the point of non-viability - consultative document

August 2010

The Basel Committee on Banking Supervision has issued for consultation a proposal to ensure that all regulatory capital instruments are able to absorb losses in the event that the issuing bank reaches the point of non-viability. It is based on a requirement that the contractual terms of capital instruments will allow them at the option of the regulatory authority to be written-off or converted to common shares in the event that a bank is unable to support itself in the private market in the absence of such conversions.

The proposal is an important element of finalising the Committee's package of measures to strengthen the resilience of the banking sector, set out in the December 2009 consultative document Strengthening the resilience of the banking sector.

The Committee welcomes comments on all aspects of this proposal by Friday 1 October 2010. Comments should be submitted by post (Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland) or email (baselcommittee@bis.org). Comments may be published on the Bank for International Settlements' website unless a commenter specifically requests anonymity.