Finalized Guidance Document Concerning the Implementation of Basel III

Common Equity Tier 1 Common Equity Tier 1 capital consists of the sum of the following elements: • Common shares issued by the bank that meet the criteria for classification as common shares for regulatory purposes (or the equivalent for non-joint stock companies); • Stock surplus (share premium) resulting from the issue of instruments included Common Equity Tier 1; • Retained earnings; • Accumulated other comprehensive income and other disclosed reserves; (There is no adjustment applied to remove from Common Equity Tier 1 unrealized gains or losses recognized on the balance sheet. Unrealized losses are subject to the transitional arrangements set out in paragraph 94 (c) and (d) Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems, 2011. ) • Common shares issued by consolidated subsidiaries of the bank and held by third parties (i.e. minority interest) that meet the criteria for inclusion in Common Equity Tier 1 capital. • Retained earnings and other comprehensive income include interim profit or loss. • Dividends are removed from Common Equity Tier 1 in accordance with applicable accounting standards. The treatment of minority interest and the regulatory adjustments applied in the calculation of Common Equity Tier 1 are addressed in separate sections. Common shares issued by the bank For an instrument to be included in Common Equity Tier 1 capital it must meet all of the criteria that an outlined in Annex-2 . The vast majority of internationally active banks are structured as joint stock companies. (Joint stock companies are defined as companies that have issued common shares, irrespective of whether these shares are held privately or publically. These will represent the vast majority of internally active banks) 1 and for these banks the criteria must be met solely with common shares. In the rare cases where banks need to issue non-voting common shares as part of Common Equity Tier 1, they must be identical to voting common shares of the issuing bank in all respects except the absence of voting rights. • Common shares issued by consolidated subsidiaries are described in section 3 of this document. Regulatory adjustments applied in the calculation of Common Equity Tier 1 are described in section 4 of this document. • Common shares issued by consolidated subsidiaries are described in section 3 of this document. 1 Refer to paragraphs 53: Basel III: A global regulatory framework for more resilient banks and banking system revised version (rev June 2011 ). 2.2.2. Additional Tier 1 capital • A minimum set of criteria for an instrument issued by the bank to meet or to exceed in order for its to be included in additional Tier-1 Capital and described in Annex # 3 . Additional Tier 1 capital consists of the sum of the following elements: • Instruments issued by the bank that meet the criteria for inclusion in Additional Tier 1 capital (and are not included in Common Equity Tier 1); Refer to paragraph 87-89, A global regulatory framework for more resilient banks and banking systems – revised version (rev June 2011) • Stock surplus (share premium) resulting from the issue of instruments included in Additional Tier 1 capital; • Instruments issued by consolidated subsidiaries of the bank and held by third parties that meet the criteria for inclusion in Additional Tier 1 capital and are not included in Common Equity Tier 1. Refer to section 3 for the relevant criteria; and • Regulatory adjustments applied in the calculation of Additional Tier 1 Capital are addressed in section 4 of this document. • Tier-1 Capital instruments issued by consolidated subsidiaries are described in section 3 of this document. 2.2.3. Tier 2 Capital The objective of Tier 2 is to provide loss absorption on a gone-concern basis. Based on this objective, the following out the minimum set of criteria for an instrument to meet or exceed in order for it to be included in Tier 2 capital. (Annex 4) • For details on the qualifying criteria