Frequently Asked Questions on the Basel III Implementing Guidelines

March 5, 2013BSP MEMORANDUM NO. M-2013-008TO:All BSP Supervised Financial Institutions   SUBJECT:Frequently Asked Questions on the Basel III Implementing Guidelines 1. What is Basel III? In December 2010, the Basel Committee on Banking Supervision (BCBS) introduced a set of reforms otherwise known as the Basel III. The standards include strengthening the definition of regulatory capital and the introduction of capital buffers to withstand economic and financial stress, among others. In the Philippines, the Bangko Sentral ng Pilipinas (BSP) released the Basel III Implementing Guidelines on Minimum Capital Requirements in January 2013. 2. What are the reform agenda under the Basel III Accord? How will the BSP adopt these proposals? Basel III reforms have introduced new standards in capital adequacy and liquidity. Particularly, it aims to:a. Strengthen the instruments that will qualify as "bank capital" to ensure better ability to absorb lossesb. Introduce buffers that will absorb losses in times of stress (conservation buffer) and across the business cycle (countercyclical buffer) ISAcHDc. Introduce a new global standard on liquidity risk managementd. Allow a non-risk weighted leverage ratio...