BANK3011 Lecture Notes - Lecture 12: Tier 1 Capital, Risk Measure, Tier 2 Capital

• School: University of Sydney
• Department: Bank Financial Management
• Course: BANK3011
• Professor: Eliza Wu

Document Summary

Invest in the bank (shareholders): (cid:1868)(cid:1872)(cid:1864) (cid:1872)(cid:1867)= (cid:3030)(cid:3043)(cid:3047)(cid:3039) (cid:3046)(cid:3042)(cid:3040)(cid:3032) (cid:3040)(cid:3032)(cid:3046)(cid:3048)(cid:3045)(cid:3032) (cid:3042)(cid:3033) (cid:3046)(cid:3046)(cid:3032)(cid:3047)(cid:3046, consider definition of capital, consider measurement of assets and how assets are adjusted for credit risk. Development of the basel agreements: basel committee on banking supervision (bcbs) formed in 1974 by banking authorities from g- In good times, risk measures were lower and hence required less capital. Improved quality and quantity of capital, especially tier 1. Introduced a higher liquidity standard (lcr and nsfr). Introduced an internationally harmonized (non-risk-based) leverage ratio to serve as a backstop to the risk-based capital requirements. Bank financial management: as such, the minimum cet1 capital requirement plus the buffer will be 7% of rwas once both are fully phased in. Tier 1 capital: common equity tier 1. Includes: common shares and stock surplus, retained earnings, accumulated other comprehensive income and other disclosed reserves, common shares issued by consolidated subsidiaries of the bank and held by third parties, i. e. minority interests.