The major highlights of the draft guidelines are:
Minimum Capital Requirements
Common Equity Tier 1 (CET1) capital must be at least 5.5% of risk-weighted assets (RWAs);
Total capital must be at least 9% of RWAs.
Capital Conservation Buffer
The capital conservation buffer in the form of Common Equity of 2.5% of RWAs.
Transitional Arrangements
It is proposed that the implementation period of minimum capital requirements and deductions from Common Equity will begin from January 1, 2013 and be fully implemented as on March 31, 2017.
Capital conservation buffer requirement is proposed to be implemented between March 31, 2014 and March 31, 2017.
The implementation schedule indicated above will be finalized taking into account the feedback received on these guidelines.
Instruments which no longer qualify as regulatory capital instruments will be phased-out during the period beginning from January 1, 2013 to March 31, 2022.
Enhancing Risk Coverage
For OTC derivatives, in addition to the capital charge for counterparty default risk under Current Exposure Method, banks will be required to compute an additional credit value adjustments (CVA) risk capital charge.
Leverage Ratio
The parallel run for the leverage ratio will be from January 1, 2013 to January 1, 2017, during which banks would be expected to strive to operate at a minimum Tier 1 leverage ratio of 5%. The leverage ratio requirement will be finalized taking into account the final proposal of the Basel Committee.
Comments / Feedback
Comments / feedback on the draft guidelines, including implementation schedule may be sent on or before February 15, 2012 to the Chief General Manager-in-Charge, Department of Banking Operations and Development, Reserve Bank of India, Central Office Building, 12th Floor, S.B. Singh Marg, Mumbai – 400001, through e-mail . The guidelines will be finalized taking into account the suggestions and comments.
Background