In a long-anticipated but not eagerly-awaited action, the three federal banking agencies released three notices of proposed rulemaking (NPRs) that will revise regulatory capital rules for US banking organizations and align them with the Basel III capital standards that were issued in December 2010 and subsequently updated in 2011 (Basel III).
The NPRs establish tougher capital standards through more restrictive capital definitions, higher risk-weighted assets, additional capital buffers, and higher requirements for minimum capital ratios. Once incorporated into the US regulatory capital framework, the Basel III reforms will fundamentally impact profitability and transform the business models of many banks.
These proposed reforms will also require these organizations to undertake significant process, data management, and system changes to achieve upgrades in the areas of data management, stress testing, counterparty risk, and capital management infrastructure.
In this A Closer Look, we review and analyze the new regulatory capital rules. To read this A Closer Look, please click here.