Basel II
Recently, the Basel Committee on Banking Supervision has revised the capital adequacy regulation. Known as Basel II, it is discussed in Stage 8.
| Banks must obey the Basel Committee’s regulation on bank capital, which calls for an 8% capital requirement on risk-adjusted assets. | BIS ratio | = capital adequacy ratio = Cooke ratio | | | = (capital/weighted asset) ≥ 8% |
The capital (defined by the BIS) consists of two parts: Tier 1 (core capital) and Tier 2 (supplementary capital). Risk adjustment factors applying to positions (on- and off-balance sheet) range from 0% to 100%.
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