This article explores the potential for pure market pricing of minimum banking capitalisation ratios. In particular, it reviews the track-record of existing commodities exchanges calculation methods, such as CME’s SPAN system in determining safe capital adequacy buffers. The post follows through from the recent BSCB announcement on minimum tier-one capitalisation requirements.
Tag Archive 'BIS'
The powers that be of the Basel Committee on Banking Supervision have now decided: seven is the new golden number. That is a 7% tier-one capitalisation ratio to be phased in by 2018. This will have a significant impact both on bank’s operating models and future earning profiles. Tier-One ratios affects as much a bank’s ability to absorb losses as its ability to earn profit and raise new capital.