FSA has published a statement summarising the bank recapitalisation package. It has clarified it decided the appropriate level of capital for each relevant bank based on:
- ensuring the amount of capital would sustain confidence in that institution; and
- ensuring the institution would have a capital buffer over minimum capital requirements that would absorb losses in a recession and allow it to continue lending on normal commercial criteria.
It used stress tests based on framework ratios of capital to risk weighted assets of total Tier 1 Capital of at least 8% and Core Tier 1 capital of at least 4% after the stressed scenario. FSA emphasised it has not set new capital ratios generally and will be looking at the longer term capital regime for deposit-takers next year.