ABA Banking Journal - November 2010 - (Page 33)

Special report | the capital challenge Basel III redefines capital For community banks, the third time around for the global rules may be less “the charm” than cause for alarm By Mary Frances Monroe T he sleepy town of Basel, Switzerland, seems an unlikely source for radical changes to the global banking environment. Best known as a pharmaceutical headquarters, it is also home to the Bank for International Settlements, sponsor of the Basel Committee on Banking Supervision. The committee sets international standards for the conduct and risk management of a wide range of bank activities, including standards for appropriate levels of capital to be held against risks of those activities. The committee’s most recent previous pronouncement on regulatory capital—dubbed Basel II—was applied in the U.S. only to large, internationally active banks. Thus the Basel Committee has not been on the radar of most community banks since adoption of Basel I in 1988. That changed in September when the committee announced a fundamental redefinition of capital as well as heightened standards intended to apply to all banks. For many, the changes will force revisions to capital plans and, for some, require new sources of equity capital. Bumpy road from i to iii Current capital rules applied to U.S. banks and bank holding companies are based on the Basel I accord, which started the risk-sensitive approach to capital requirements. Exposures on and off the balance sheet were classified into broad categories of credit risk. Over time, Basel I was criticized for being insufficiently granular in its assignment of assets to risk catnovember 2010 | ABA BANKING JOURNAL | 33

Table of Contents for the Digital Edition of ABA Banking Journal - November 2010

ABA Banking Journal - November 2010
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
ABA Community Banking: Chapter 12’s Bad Fit
Pass the Aspirin
Tech Topics
Capital Squeeze
Basel III Redefines Capital
Compliance Clinic
Compliance Inbox
ABA Resources
Investment Management
Surveys & Trends
First Person

ABA Banking Journal - November 2010

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