Basel Iii Implications

FINANCIAL INSTITUTIONS ADVISORY & FINANCIAL REGULATORY

CLIENTCLIENT ALERT PUBLICATION

March 30, 2011

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The New Basel III Framework: Implications for Banking Organizations

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The Basel Committee on Banking Supervision (the “Basel Committee”) released a near final version of its new bank capital and liquidity standards, referred to as “Basel III”, in December 2010. Subsequent guidance was issued in January 2011 regarding minimum requirements for regulatory capital instruments. The United States and the European Union have publicly endorsed the Basel III standards and are considering how to implement them into law in their respective jurisdictions. Legal and compliance personnel at impacted financial institutions will need to work alongside risk management staff to ensure their institution is able to comply with the new standards.

Basel III is a series of amendments to the existing Basel II framework. The core aspects of Basel III are scheduled to be implemented into national law by January 1, 2013; certain aspects of the new standards are slated to become effective upon implementation while others will be phased in over several years. Well before 2013, however, it will become essential for legal and compliance professionals at many institutions to have a working understanding of the new Basel III standards in order to be able to assist in the development of a bank capital plan that meets supervisory expectations. In the U.S., for example, large banking groups are required to demonstrate their ability to comply with Basel III standards both as a formal part of their capital plans and...