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Newsletter | February 2014, Issue 1
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BANKING |
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Increased Capital Regulations on Domestic Banks in Line with Basel 3 Enforcement |
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From December 1, 2013, the Financial Services Commission (“FSC”) announced to enforce Basel 3 which is the strengthened safety and soundness regulation applied to the banking sector.
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The details of Basel 3 are as follows:
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Subdivision of Minimum Capital Regulations
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Each minimum capital requirement that should be retained by a bank in relation to the bank’s risk weighted assets is subdivided by the type of capital. |
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Common equity must comprise of 4.0% of risk-weighted assets from January 2014 and 6.0% of risk-weighted assets from January 2015. |
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Tier 1 capital must comprise of 5.5% of risk-weighted assets from January 2014 and 6.0% of risk-weighted assets from January 2015. |
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The total capital must comprise of 8% of risk-weighted assets. |
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Subdivision of Pre-Requisite of Prompt Corrective Action |
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The existing pre-requisite of the Prompt Corrective Action based on total capital ratio will be subdivided into total capital ratio, tier 1 capital ratio and common equity ratio. |
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Plans for Future Implementation of Other Basel 3 Regulations |
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In order to introduce other Basel 3 regulations in 2015 and 2016 (such as Liquidity Coverage Ratio), the FSC will amend the relevant regulations through consultation with related government agencies during 2014. |
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