Of Special Interest
- Financial wellness affects half of peoples’ mental or physical health, finds report
- Study finds traditional financial institutions embrace Fintech disruption
- Grass is greener for environmentally friendly businesses, finds Barclays
- Prospective homeowners would consider a 40-year mortgage to escape renting, finds Santander
- Millennials’ needs are changing the face of banking industry, says new report
- FS is putting consumer data at risk by failing to protect mobile apps, says Arxan
- A lack of belief in their ability holds 28% women back in work, says Cambridge & Counties
- ‘Which?’ reveals Scotland has lost over a third of its bank branches in eight years
- Next downturn unlikely to be as bad as 2008, according to S&P
- FCA reveals findings from first cryptoassets consumer research
- US consumers favour single mobile app for banking and payments
- Banks suffering major IT shutdowns every day, ‘Which?’ reveals
- The US will be a key offshore centre in 2019, says GlobalData
- Debit industry changes markedly in 10 years of the Debit Issuer Study
- UK's ‘Big Five’ face ‘too big to compete’ as small challengers secure stellar returns
- Banks as vulnerable now as before crash, says new study
- Leverage ratio a constant conundrum for European and US banks, says SNL
23rd December 2011
Own Debt fair value excluded from CT1 capital proposal
The Basel Committee on Banking Supervision issued a consultation document this week proposing that "all unrealised gains and losses that have resulted from changes in the fair value of liabilities that are due to changes in the bank's own credit risk" be excluded from the calculation of Core Tier 1 (CT1) capital. Note that the Committee proposes that "debit valuation adjustments (DVAs) for over-the-counter derivatives and securities financing transactions should be fully deducted in the calculation of Common Equity Tier 1".
Comments on the proposal to the amendment of Paragraph 75 of the Basel III rules must be provided by 17th February 2012.
The Basel Committee does not set accounting standards. Contrary to some media reports the Basel III proposal will not alter the wild swings in profit shown in banks' reports and accounts caused by change in debt value. Many countries in Europe and Asia report to International Finance Reporting Standards set by the International Accounting Standards Board. Earlier this year the Board proposed that such fair value changes be reported as other comprehensive income and hence removed from the income statement and the calculation of net (attributable to shareholder) profit. This proposal will take some years to phase in however.