Bancherul - BANCI / ENGLISH / Amendments to the Basel 3 proposal presented

The Basel Committee disclosed some preliminary agreements on some of the proposals that were made in December last year, said Danske Bank.

There were significant changes in both the contents and the timeframe in the original proposal and overall it looks as if the regulatory changes will be less dramatic than we previously
anticipated. The most important changes concern the definition of capital, the leverage ratio, and the global liquidity standard ¡V liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).

The main changes are:
- Capital: Bank minority holdings will now be recognised to some extent and some tax assets can be recognised as part of tier-1 capital. These two changes do not have any material effect on Nordic banks.

- Leverage ratio: A leverage ratio of 3% will be introduced but not as a Pillar 1 requirement before 2018. Furthermore, the calculation will be less strict and e.g. netting of bought and sold CDSs is now allowed for.

We had expected a leverage ratio around 4% and combined with the long implementation horizon the effect on Nordic banks of the introduction of the leverage ratio is limited.

- Liquidity:
- LCR: A "level 2" group of liquid assets with a cap that allows up to 40% of the stock to be made up of these assets is introduced.

This pool includes high quality (at least AA-) non-financial corporate and covered bonds not issued by the bank itself with a 15% haircut (20% in December proposal).

- NSFR: Importantly the NSFR is postponed to January 2018. Furthermore, haircuts on the liability side have been lowered and the required stable funding ratio for mortgages is reduced from 100% to 65%.