Further to the publication by BCBS of its final Basel III rules in December 2010, it announced on January 13, 2011, its minimum requirements to ensure that all regulatory capital investments are capable
Basel III Rules...capital requirements [for banks] will be subs tantially increased and phased in between 2013 and 2015.
of fully absorbing losses at the point a bank becomes non-viable. The paper envisages that all tier 1 and tier 2 capital investments will be required to provide for a mandatory write-down or conversion into common stock by reference to a trigger event. Such event will be a decision by a relevant regulatory authority that a write-down or conversion of the capital investment is necessary or, if earlier, a decision to make a public sector injection of capital. Both triggers require a determination by the regulatory authority that the bank would otherwise become nonviable. It is envisaged these requirements will be introduced from January 1, 2013, and recognition of existing tier 1 and tier 2 capital investments will be gradually phased out. For more information, see our client alert at http://www.mofo.com/files/Uploads/Images/110121-Minimum-Bail-In-Criteria.pdf.