Capital Structure
Calculation of minimum capital that must be owned by a bank does not determine the structure of capital that must be owned.
Basel I does not only create a framework for calculating capital adequacy, but also the framework for bank capital structure (or called 'eligible capital')
Basel elements that set the main bank's eligible capital is equity capital (capital stock)
However, banks can have a capital in Tier 2 are:
Tier 1 - the stock has been issued and fully paid and non-cumulative perpetual preferred stock and disclosed réservés
Tier 2 - undisclosed réservés, revaluasi reserve assets, pencadangan general and specific, hybrid capital instruments and subordinated debt
Tier 2 capital can not be more than 50% of total capital
Calculation of capital should not include:
Goodwill
Investment in companies and companies that are not consolidated
Investment in bank capital and other financial companies (depending on the bank supervisory policies of each country)
Minority investments in companies that are not consolidated (eg, on the other bank)
There is a Tier 3 is available only to support the bank's portfolio of trade.
Monday, July 27, 2009
Capital Requirements in Basel I
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