Regulatory Alerts2013-05-30
Added
Amendments to Proper Conduct of Banking Business Directive No. 202 on Regulatory Capital
The Bank of Israel amends Proper Conduct of Banking Business Directive No. 202 to adopt Basel III recommendations for banking corporations and credit card companies. The revised framework establishes a two-tier regulatory capital structure comprising Common Equity Tier 1, Additional Tier 1, and Tier 2 capital, while eliminating Tier 3 capital and the distinction between upper and lower Tier 2 capital. Specific eligibility criteria are set for capital instruments, including loss absorption mechanisms triggered when Common Equity Tier 1 capital falls below 7 percent for Additional Tier 1 and 5 percent for Tier 2. The amendments also introduce deductions for deferred tax assets and pension fund assets, apply a 1,250 percent risk weight to certain investments, and mandate that surplus investments in a single non-financial corporation exceeding 5 percent of Common Equity Tier 1 capital be weighted at 1,250 percent. These provisions take effect on January 1, 2014.
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