Regulatory Alerts2011-02-13
Basel Committee Final Elements on Regulatory Capital Reform and Loss Absorbency at the Point of Non-Viability
The Basel Committee, communicated through the Saudi Arabian Monetary Agency, requires banks issuing additional tier-1 or tier-2 capital instruments to meet minimum loss absorbency standards at the point of non-viability before taxpayers bear losses. These newly defined requirements supplement the December 2010 Basel III capital rules and take immediate effect upon the circular's issuance. All Saudi banks must incorporate these standards into their capital planning and instrument structuring processes to ensure regulatory compliance.
�aubi Qlrabian ;ffflonetarp Qlgencp B,�nking Supervision Dept. l l I I From To Attention Subject \s February 2011 i�64Lf /Bos-: o 1,, Saudi Arabian Monetary Agency All Banks Managing Directors, Chief Executive Officers and General Managers Basel Committee - Final Elements of the Reform to Raise the Quality of Regulatory Capital - Loss Absorbency at the Point of Non-Viability The Basel Committee on 13 January 2011 has issued a Press Release accompanied by the minimum requirements to ensure that all classes of capital instruments fully absorb losses at the point of non-viability before tax payers are exposed to losses. The Committee is proposing that in order for an instrument issued by a bank to be included in additional (i.e. non-common) tier-1 or tier-2 capital, it must meet or exceed minimum requirements set out in Annex 1 to the Basie Press Release dated 13 January 2011. These requirements are in addition to the criteria detailed iri the Basel Ill capital rules that were published in December 2010. All Banks in Saudi Arabia are required to be familiar with these minimum requirements and shouid take these into consideration when planning to issue any additional tier-·1 or tier-2 capital instruments. These rules go into immediate effect from the date of this Circular. You may access the minimum requirements and the Press Release dated 13 January 2011 from Bank for International Settlements (BIS) website address: (http://www.bis.org). »I S C\ .. c0' 7-3- 14-32. Dr. Abdulrahman Al Kalaf Deputy Governor for Technical Affairs I P. 0. Box 2992 - Riyadh 11169, Saudi Arabia - Tel.: 01-463 3000 - Telex 404390 SJ - Fax 01-466 2119 1 '""/ j l