There is also general agreement that, in order to avoid uneven playing fields and the related problems of regulatory arbitrage, such capital and liquidity frameworks should be globally accepted and implemented by financial institutions.
In December 2010, the Basel Committee on Banking Supervision (BCBS) agreed to new rules outlining global regulatory standards on bank capital adequacy and liquidity as agreed to by the Governors and Heads of Supervision, and endorsed by G-20 Leaders at the November 2010 Seoul summit. The new rules require financial institutions around the globe to hold more and higher quality capital, introduce a global liquidity framework, and establish a countercyclical capital buffer.
The countercyclical capital buffer within the range of zero percent to 2.5 percent of risk-weighted assets and mandates any increase to the countercyclical buffer be pre-announced by up to 12 months to give banks time to meet the additional capital requirements before they take effect. Reductions in the buffer would take effect immediately to help to reduce the risk of the supply of credit being constrained by regulatory capital requirements. Banks must meet the buffer with Common Equity Tier 1 – possible use of other fully loss absorbing capital is still under review.
The rules also set the capital conservation buffer at 2.5 percent and it will be subject to the tiered restrictions which create a strong incentive to remain above the buffer.
Notably, the final text does not define a surcharge for systemically important financial institutions (SIFIs), but says that SIFIs “should have loss-absorbing capacity beyond the minimum standards and the work on this issue is ongoing.” The BCBS is developing a proposal on a methodology comprising both quantitative and qualitative indicators to assess the systemic importance of financial institutions at a global level.
The rules also include: capital incentives for banks to use central counterparties for over-the-counter derivatives; higher capital requirements for trading and derivative activities, as well as complex securitizations and off-balance sheet exposures; and the introduction of liquidity requirements that penalize excessive reliance on short term, interbank funding to support longer dated assets.
Originally, the national implementation date was January 1, 2013, and the full implementation phase would occur through January 1, 2019.
On November 9, 2012, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued a release which stated, "In light of the volume of comments received and the wide range of views expressed during the comment period, the agencies do not expect that any of the proposed rules would become effective on January 1, 2013."