Handbook of Basel III capital : enhancing bank capital in practice / Juan Ramirez.

Format:

Book

Author/Creator:

Ramirez, Juan, 1961- author.

Series:

THEi Wiley ebooks.

THEi Wiley ebooks

Language:

English

Subjects (All):

Basel III (2010).

Basel III.

Bank capital.

Banks and banking, International.

International finance.

Physical Description:

1 online resource (563 pages) : illustrations (some color), tables

Edition:

1st ed.

Place of Publication:

Chichester, England : Wiley, 2017.

System Details:

Access using campus network via VPN at home (THEi Users Only).

Summary:

A deeper examination of Basel III for more effective capital enhancement The Handbook of Basel III Capital - Enhancing Bank Capital in Practice delves deep into the principles underpinning the capital dimension of Basel III to provide a more advanced understanding of real-world implementation. Going beyond the simple overview or model, this book merges theory with practice to help practitioners work more effectively within the regulatory framework, and utilise the complex rules to more effectively allocate and enhance capital. A European perspective covers the CRD IV directive and associated guidance, but practitioners across all jurisdictions will find value in the strategic approach to decisions surrounding business lines and assets; an emphasis on analysis urges banks to shed unattractive positions and channel capital toward opportunities that actually fit their risk and return profile. Real-world cases demonstrate successful capital initiatives as models for implementation, and in-depth guidance on Basel III rules equips practitioners to more effectively utilise this complex regulatory treatment. The specifics of Basel III implementation vary, but the underlying principles are effective around the world. This book expands upon existing guidance to provide a deeper working knowledge of Basel III utility, and the insight to use it effectively. * Improve asset quality and risk and return profiles * Adopt a strategic approach to capital allocation * Compare Basel III implementation varies across jurisdictions * Examine successful capital enhancement initiatives from around the world There is a popular misconception about Basel III being extremely conservative and a deterrent to investors seeking attractive returns. In reality, Basel III presents both the opportunity and a framework for banks to improve their assets and enhance overall capital - the key factor is a true, comprehensive understanding of the regulatory mechanisms. The Handbook of Basel III Capital - Enhancing Bank Capital in Practice provides advanced guidance for advanced practitioners, and real-world implementation insight.

Contents:

Cover

Title Page

Copyright

Contents

Preface

About the Author

Chapter 1: Overview of Basel III

1.1 Introduction to Basel III

1.1.1 Basel III, CRR, CRD IV

1.1.2 A Brief History of the Basel Accords

1.1.3 Accounting vs. Regulatory Objectives

1.2 Expected and Unexpected Credit Losses and Bank Capital

1.2.1 Expected Losses

1.2.2 Unexpected Losses

1.3 The Three‐Pillar Approach to Bank Capital

1.3.1 Pillar 1 - Minimum Capital Requirements

1.3.2 Pillar 2 - Supervisory Review and Evaluation Process

1.3.3 Pillar 3 - Market Discipline

1.3.4 Significant Subsidiaries Disclosure Requirements

1.4 Risk‐Weighted Assets (RWAs)

1.4.1 Calculation of Credit Risk RWAs

1.4.2 Calculation of Counterparty Credit Risk (CCR) RWAs

1.4.3 Calculation of Market Risk RWAs

1.4.4 Calculation of Securitisation Exposures RWAs

1.4.5 Calculation of Operational Risk RWAs

1.4.6 Link between RWAs and Capital Charges

Chapter 2: Minimum Capital Requirements

2.1 Components and Minimum Requirements of Bank Capital

2.1.1 Pillar 1 Capital Requirements

2.1.2 Pillar 2 Capital Requirements

2.2 Components and Minimum Requirements of Capital Buffers

2.3 Capital Conservation Buffer

2.4 Countercyclical Buffer

2.4.1 The Countercyclical Buffer Ratio and the Credit-to-GDP Gap

2.4.2 The Reciprocity Principle

2.5 Systemic Risk Buffers

2.5.1 Systemic Risk Buffer

2.5.2 Global Systemically Important Bank (G-SIB) Buffer

2.5.3 Other Systemically Important Institution (O-SII)

2.5.4 Interaction between the Systemic Risk Buffers

2.6 Going Concern vs. Gone Concern Capital

2.6.1 Going Concern

2.6.2 Gone Concern

2.7 Case Study: UBS vs. JP Morgan Chase G-SIB Strategies

2.7.1 G-SIB Methodology

2.7.2 UBS's G-SIB Strategy.

2.7.3 JP Morgan Chase's G-SIB Strategy

2.8 Transitional Provisions

2.8.1 Phase-in vs. Fully Loaded Capital

2.8.2 Grandfathering of Non-compliant AT1 and Tier 2 Instruments

2.8.3 Transitional Provisions Regarding Capital Conservation and G-SIB Buffers

Chapter 3: Common Equity 1 (CET1) Capital

3.1 CET1 Minimum Requirements

3.2 Eligibility Requirements of CET1 Instruments

3.2.1 Criteria Governing Instruments Inclusion in CET1

3.2.2 Major Components of CET1

3.2.3 Accounting Overview of Shareholders' Equity

3.2.4 Capital Instruments and Share Premium

3.2.5 Retained Earnings and Interim Net Income less Expected Dividends

3.3 Case Study: UBS Dividend Policy and Its Impact on CET1

3.3.1 UBS Historical Dividend and Buyback Policies

3.3.2 Accounting for Distributions of Non‐cash Assets to Owners

3.3.3 Distribution of Treasury Shares as Dividend

3.3.4 Distribution of Newly Issued Shares as Dividend

3.4 Case Study: Santander Dividend Policy and Its Impact in CET1

3.4.1 Santander's Traditional Scrip Dividend Policy

3.4.2 Santander's New Dividend Policy

3.5 Accumulated Other Comprehensive Income

3.5.1 Translation Differences

3.5.2 Cash Flow Hedge Reserve

3.5.3 Gains and Losses on Instruments at FVTOCI

3.5.4 Actuarial Gains/Losses on Defined Benefit Pension Plans

3.5.5 Other Items in OCI

3.6 Case Study: Banco BPI's Partial Disposal of Portfolio of Portuguese and Italian Government Bonds

3.6.1 Accounting Treatment of the Combination of the Bonds and Swaps

3.6.2 Regulatory Capital Impact of the Combination of the Bonds and Swaps

3.6.3 Regulatory Rationale of BPI's Partial Disposal of the Bonds and Swaps Portfolio

3.7 Other Items Eligible for CET1 Capital

3.7.1 Other Reserves

3.7.2 Funds for General Banking Risks

3.7.3 Eligible Minority Interests.

3.8 CET1 Prudential Filters

3.8.1 Phase‐in Provisions

3.8.2 Deductions from CET1

3.9 Additional Valuation Adjustments

3.10 Intangible Assets (Including Goodwill)

3.10.1 Goodwill from an IFRS Accounting Perspective

3.10.2 Treatment of Intangible Assets (other than Goodwill) from an IFRS Accounting Perspective

3.11 Case Study: Danske Bank's Goodwill Impairment

3.11.1 Accounting and Tax Impact of the Impairment

3.11.2 Regulatory Capital Impact of the Impairment

3.11.3 Other Impacts

3.12 Case Study: Barclays Badwill Resulting From Its Acquisition of Lehman Brothers N.A.

3.13 Deferred Tax Assets

3.14 Fair Value Reserves Related to Gains or Losses on Cash Flow Hedges

3.14.1 Cash Flow Hedges - Accounting Mechanics

3.14.2 Case Study: Hedging a Floating Rate Liability with an Interest Rate Swap

3.15 Negative Amounts Resulting From the Calculation of Expected Loss Amounts

3.15.1 Shortfall of Provisions

3.15.2 Excess of Provisions

3.16 Equity Increases Resulting from Securitised Assets

3.17 Gains or Losses on Liabilities Valued at Fair Value Resulting from Changes in Own Credit Standing

3.17.1 Financial Liability Categories

3.17.2 Partial Repurchases of Financial Liabilities

3.17.3 The Fair Value Option

3.17.4 Changes in Credit Risk in Financial Liabilities at FVTPL - Debt Instruments

3.17.5 Application of Own Credit Gains and Losses to Derivatives - DVA

3.17.6 CVA/DVA Calculation from Netting Sets

3.17.7 Basel III Treatment of Own Credit Gains and Losses

3.18 Defined‐Benefit Pension Plans

3.18.1 Defined Contribution vs. Defined Benefit Pension Plans

3.18.2 Accounting Treatment of Defined Benefit Pension Plans

3.18.3 Regulatory Treatment of Defined Benefit Pension Plans

3.18.4 Initiatives to Enhance CET1 Impact of Defined Benefit Pension Plans.

3.18.5 Additional Considerations

3.19 Case Study: Lloyds' De‐Risking of its Defined Benefit Pension Plans

3.19.1 Changes during 2012

3.19.2 Changes during 2013

3.19.3 Changes during 2014

3.20 Holdings by a Bank of Own CET1 Instruments

3.20.1 Indirect Holdings Arising from Index Holdings

3.20.2 Requirements for the Repurchase of Own CET1 Instruments

3.21 Case Study: Danske Bank's Share Buyback Programme

3.21.1 Legal Background

3.21.2 Accounting Impact

3.21.3 CET1 Capital Impact

3.22 Case Study: Deutsche Bank's Treasury Shares Strategy

3.22.1 Governance Related to Deutsche Bank's Acquisition of Own Shares

3.22.2 Accounting and Regulatory Impact of Forwards on Own Shares

3.22.3 Accounting and Regulatory Impact of Sold Put Options on Own Shares

3.22.4 Accounting and Regulatory Impact of Bought Call Options on Own Shares

3.22.5 Accounting and Regulatory Impact of Deutsche Bank's Treasury Shares Activity in 2014

3.23 Holdings of the CET1 Instruments of Financial Sector Entities

3.24 Deduction Election of 1,250% RW Assets

3.25 Amount Exceeding the 17.65% Threshold

3.26 Foreseeable Tax Charges Relating To CET1 Items

3.27 Excess of Qualifying AT1 Deductions

3.28 Temporary Filter on Unrealised Gains and Losses on Available‐ for‐Sale Instruments

Chapter 4: Additional Tier 1 (AT1) Capital

4.1 AT1 Minimum Capital Requirements

4.2 Criteria Governing Instruments Inclusion in AT1 Capital

4.2.1 Requirements of AT1 Instruments

4.2.2 Restrictions on the Cancellation of Distributions AT1 Instruments and Other Features

4.2.3 Special Requirements for Write‐down or Conversion of AT1 Instruments

4.2.4 Procedures and Timing for Determining the Occurrence of a Trigger Event

4.2.5 Use of Special Purposes Entities for Indirect Issuance of Capital Instruments.

4.2.6 Conditions to the Redemption or Repurchase of Capital Instruments

4.3 Deductions from AT1 Capital

4.3.1 Direct and Indirect Holdings of Own AT1 instruments

4.3.2 Excess of Qualifying Tier 2 Deductions

4.3.3 Foreseeable Tax Charges Relating to AT1 Items

4.4 Holdings of AT1 Instruments of Other Financial Institutions

4.4.1 Reciprocal Cross‐holdings of AT1 Instruments Designed to Artificially Inflate Own Funds

4.4.2 Holdings of the AT1 Instruments of Financial Sector Entities where the Bank does not have a Significant Investment

4.4.3 Holdings of the AT1 Instruments of Financial Sector Entities where the Bank Has a Significant Investment

4.5 Case Study: Lloyds Banking Group Exchange Offer of Tier 2 for AT1 Securities

4.5.1 Takeover of HBOS

4.5.2 Asset Protection Scheme and its Regulatory Capital Benefits

4.5.3 Rights Issue and Issuance of the ECNs

4.5.4 Accounting Impact of the Rights Issue and the ECNs

4.5.5 Exchange Offer of ECNs for CoCos

4.5.6 Regulatory Impact of the Exchange

4.5.7 Accounting Impact of the Exchange

Chapter 5: T ier 2 Capital

5.1 Tier 2 Capital Calculation and Requirements for Inclusion

5.1.1 Tier 2 Capital Calculation

5.1.2 Criteria Governing Instruments Inclusion in T ier 2 Capital

5.1.3 Amortisation of T ier 2 Instruments

5.1.4 Conditions to the Redemption or Repurchase of Tier 2 Instruments

5.2 Negative Amounts Resulting from the Calculation of Expected Loss Amounts

5.2.1 Shortfall of Provisions

5.2.2 Excess of Provisions

5.3 Deductions from Tier 2 Capital

5.3.1 Direct and Indirect Holdings of Own Tier 2 Instruments

5.4 Holdings of Tier 2 Instruments of Other Financial Institutions

5.4.1 Reciprocal Cross‐holdings of Tier 2 Instruments Designed to Artificially Inflate Own Funds.

5.4.2 Holdings of Tier 2 Instruments of Financial Sector Entities where the Bank does not Have a Significant Investment.

Notes:

Includes bibliographical references and index.

Description based on print version record.

ISBN:

9781119330899

1119330890

9781119330844

111933084X

9781119330806

1119330807

OCLC:

967096739