The newly expanded BCBS has agreed measures to strengthen the regulatory capital framework. The new standards:
- promote the build-up of capital buffers for drawing down in periods of stress;
- strengthen the quality of bank capital; and
- introduce a leverage ratio as a backstop to Basel II.
It also plans to consult in early 2010 on measures to reduce excess cyclicality in capital requirements and on provisioning.
It is introducing higher risk weights for resecuritisation exposures and requiring banks to conduct more rigorous credit analyses of externally rated securitisation exposures. It has produced supplemental Pillar 2 guidance which covers:
- firm-wide governance and risk management;
- capturing the risk of off-balance sheet exposures and securitisation activities;
- managing risk concentrations;
- providing incentives for banks to better manage risk and returns over the long term; and
- sound compensation practices.
Strengthened Pillar 3 requirements include:
- securitisation exposures in the trading book;
- sponsorship of off-balance sheet vehicles;
- resecuritisation exposures; and
- pipeline and warehousing risks with regard to securitisation exposures.