Capital Requirements for Banks with Basel 2

The Basel Committee on Banking Supervision and CEBS have conducted a study on how the new capital adequacy regulations that enter into force next year can be expected to affect the capital requirement for banks. The study is entitled Quantitative Impact Study 5 (QIS 5) and is conducted on data gathered during the autumn of 2005. It encompasses the member countries of the Basel Committee (G10), several EU and EES countries and a handful of other countries.

Both the Basel Committee and CEBS are publishing detailed reports regarding the results of the study for each group.4 Finansinspektionen provides here a summary of these reports, including a separate group report for the results of the participating Swedish banks.

The underlying motivation for the study was partly the need to evaluate if the proposed regulations could be expected to achieve reasonable and desirable results, or if the regulations should be re-calibrated. The Basel Committee has now drawn the conclusion that the results from QIS 5 do not indicate a need for any adjustments before the regulations come into force. The Basel Committee has thereby determined not to do the previous calibration of the regulations. The EG directive has been calibrated in the same manner.

The study demonstrates that the minimum capital requirement under Pillar 1 in the new regulations decreases in comparison to the current capital adequacy regulations. For the group of internationally active and diversified banks with Tier 1 capital exceeding EUR 3 billion, the minimum capital requirement decreases on average by 6.8 percent in G10 countries and 7.7 percent in CEBS, based on the method the banks themselves consider most probable that they will apply. For the four Swedish banks5 that participated in the study, the results indicate that the minimum capital requirement on average decreases by 1.2 percent using the standardised method and 25.8 percent using the foundation IRB method. The results for the foundation l IRB method represent the most probable method since all four plan to use the foundation IRB method.

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