Regulatory capital—purpose, quantity and quality
Produced in partnership with Morrison & Foerster LLP
Regulatory capital—purpose, quantity and quality

The following Financial Services practice note Produced in partnership with Morrison & Foerster LLP provides comprehensive and up to date legal information covering:

  • Regulatory capital—purpose, quantity and quality
  • Definition of regulatory capital
  • Purpose of regulatory capital
  • Reasons why banks need to have regulatory capital
  • Quality of regulatory capital
  • Quantity of regulatory capital
  • CRD V and CRR II

Brexit; As of exit day (31 January 2020), the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. This has an impact on this Practice Note. For further guidance on the impact of Brexit on the Capital Requirements Regulation (EU) 575/2013 (CRR) and prudential regulation, see Practice Note: Impact of Brexit: CRR and prudential regulation—quick guide.

This Practice Note provides a summary of the internationally recognised requirement for financial institutions, in particular banks and investment firms, to maintain a minimum level of regulatory capital. It considers what regulatory capital is, its purpose and the quality and quantity required by current regulation. The current international standard stems from the Basel III regime as published by the Basel Committee on Banking Supervision (BCBS). On 20 June 2013, the Council of the European Union adopted the CRD IV package to implement the Basel III international reforms across Member States in Europe and to introduce stricter capital requirements for banks and investment firms. The CRD IV package was published in the Official Journal on 1 July 2013 and the majority of provisions came into effect on 1 January 2014 (for further background on CRR and CRD IV see Practice Note: CRD IV—essentials).

Definition of regulatory capital

Regulatory capital

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