Similarly, banks would have incentives to game capital adequacy requirements by manipulating how capital and assets are defined.

There seems to be little appetite for proposals to vary capital adequacy requirements counter cyclically.

Consider banks capital requirements.

Banks capital adequacy ratios were set globally, and, once set, remained fixed.

Where this is not possible, it means stringently restricting what they can do and imposing higher taxes and capital adequacy requirements, thereby helping level the playing field.

Similarly, banks would have incentives to game capital adequacy requirements by manipulating how capital and assets are defined. Indeed, investment banks like Goldman Sachs and Barclays Capital are already inventing new types of securities to reduce the capital cost of holding risky assets.

The best known tools for this are margin requirements and minimum capital requirements.

The United States is emphasizing higher capital requirements.

None of the major banks met even the Basel 1 standards for capital adequacy.

Smarter capital requirements better Basel rules aren t the answer.

Moreover, the use of mechanistic rules to determine capital adequacy has also inadvertently encouraged systemic imprudence.

Counter cyclical capital requirements fit with this idea, and a range of indicators could be used to calibrate the increase in capital requirements, coupled perhaps with some discretion.

At the source, capital requirements for currency mismatches in portfolios, together with margin requirements on foreign exchange derivatives, make sense.

Since high risk premiums on government bonds endanger the capital adequacy of banks, half a solution is not enough.

The recent agreement by the Basel Committee on Banking Supervision on a new capital adequacy framework is another positive step.

Capital adequacy and liquidity risks should be assessed on a group level, rather than country by country how capital and risks are divided between countries is less important.

All this financial engineering would avoid the obsolete capital requirements that burden banks operation.

That means breaking up too important to fail (or too complex to fix) institutions. Where this is not possible, it means stringently restricting what they can do and imposing higher taxes and capital adequacy requirements, thereby helping level the playing field.

The Basel III agreement on capital adequacy and other recent reforms still have not ring fenced trade financing from these potential shocks.

There have been some increases in capital requirements but far short of what is needed.

Requirements

First, sovereign bonds held by banks are treated as risk free assets under EU rules for calculating banks solvency and capital adequacy levels.

These requirements are usually called the Recommended Requirements.

Form requirements

Recommendation requirements

Banks will have to recognize the losses and, if necessary, find the additional capital to meet reserve requirements.

Today s sophisticated financial engineering can render the calculation of margin and capital requirements extremely difficult, if not impossible.

Capital adequacy was a matter of judgment examiners would figure out how large a buffer a bank ought to have, taking into account its specific risks.

Many eurozone banks have made far less progress in strengthening their capital adequacy and liquidity than have American and British banks since the financial crisis erupted.

If a tightening of margin and minimum capital requirements does not deflate a bubble, regulators can tighten some more.

The capital requirements attached to that subsidiary would be more burdensome, with minimum Tier One capital set at 10 , compared to the new Basel 3 standard of 7 .

Haldane rightly complained that banking regulation has evolved from a small number of very specific guidelines to mind numbingly complicated statistical algorithms for measuring risk and capital adequacy.

Combined with elevated capital requirements for banks, it would reduce the chance of another simultaneous failure of all credit channels.

High capital and provision requirements for certain transactions, or prohibition of such transactions, should also be introduced for prudential reasons.

Banks know that they face higher capital requirements, which will force them to scale back lending relative to their resources).

We need to ensure transparency and adequate risk management, measures on which are part of my proposal on capital requirements.

The current European and global frameworks for accounting standards and capital requirements, for example, have exacerbated turmoil in the markets.

Much tougher capital requirements for trading book exposures are therefore needed and will be brought forward as soon as possible.

Reckless balance sheet expansion in pursuit of profit is kept in check if financial companies adhere to statutory capital requirements, which mandate a capital asset ratio of about 8 .

Over time, however, the interest rate premium is likely to be small, because higher capital requirements and contingent capital should significantly reduce the likelihood of ever reaching the triggers.

With respect to financial supervision, there has been increasing support since the crisis for countercyclical capital requirements, at least for banks.

The G 20 has now called for revising the Basel II standards so that capital requirements become countercyclical, and Spain s experience with such requirements suggests that doing so is a step in the right direction.

To avoid an additional credit crunch as banks deleverage, banks should be given some short term forbearance on capital and liquidity requirements.

That s why I have proposed much tougher measures in the revised Capital Requirements Directive amendments now being considered by the European Parliament.

General requirements for writing posts