Finalized Guidance Document Concerning the Implementation of Basel III

Phasing in of the Minimum Common Equity Tier 1 and Tier 1 Requirements The minimum Common Equity Tier 1 and Tier 1 requirements will be phased in between 1 January 2013 and 1 January 2015. On 1 January 2013, the minimum Common Equity Tier 1 requirement will rise from the current 2% level to 3.5%. The Tier 1 capital requirement will rise from 4% to 4.5%. On 1 January 2014, banks will have to meet a 4% minimum Common Equity Tier 1 requirement and a Tier 1 requirement of 5.5%. On 1 January 2015, banks will have to meet the 4.5% Common Equity Tier 1 and the 6% Tier 1 requirements. The total capital requirement remains at the existing level of 8.0% and so does not need to be phased in. The difference between the total capital requirement of 8.0% and the Tier 1 requirement can be met with Tier 2 and higher forms of capital. 5.3 15% Limit for Significant Investment The regulatory adjustments (ie deductions and prudential filters), including amounts above the aggregate 15% limit for significant investments in financial institutions, mortgage servicing rights, and deferred tax assets from temporary differences, would be fully deducted from Common Equity Tier 1 by 1 January 2018. 5.4 Phasing in Regulatory Adjustment In particular, the regulatory adjustments will begin at 20% of the required adjustments to Common Equity Tier 1 on 1 January 2014, 40% on 1 January 2015, 60% on 1 January 2016, 80% on 1 January 2017, and reach 100% on 1 January 2018. During this transition period, the remainder not deducted from Common Equity Tier 1 will continue to be subject to existing national treatments (Follow up). The same transition approach will apply to deductions from Additional Tier 1 and Tier 2 capital. Specifically, the regulatory adjustments to Additional Tier 1 and Tier 2 capital will begin at 20% of the required deductions on 1 January 2014, 40% on 1 January 2015, 60% on 1 January 2016, 80% on 1 January 2017, and reach 100% on 1 January 2018. During this transition period, the remainder not deducted from capital will continue to be subject to existing national treatments. (Follow up) 5.5 The Treatment of Capital Issued Out of Subsidiaries and Held by Third Parties The treatment of capital issued out of subsidiaries and held by third parties (eg minority interest) will also be phased in. Where such capital is eligible for inclusion in one of the three components of capital according to paragraphs 63 to 65 of the BCBS document of June 2011 , it can be included from 1 January 2013. Where such capital is not eligible for inclusion in one of the three components of capital but is included under the existing national treatment, 20% of this amount should be excluded from the relevant component of capital on 1 January 2014, 40% on 1 January 2015, 60% on 1 January 2016, 80% on 1 January 2017, and reach 100% on 1 January 2018. 5.6 Grand Fathering Existing public sector capital injections will be grandfathered until 1 January 2018.