Basel III implementation as of 1 January 2014

As of January 1 2014, the EU Capital Requirement Directive IV, or "Basel III", is in effect. The purpose of this directive is to improve the capital buffers of EU-based banks. The capital buffers which banks are required to hold against certain types of financing, have increased. In addition, banks are encouraged to create extra capital buffers during good economic conditions, in order to be better positioned to absorb losses in case of economic stress. Banks that do not meet the additional buffer requirement shall be limited in the ability to pay dividends or performance related bonuses.

In concrete terms, the introduction of Basel III means.

• Increase the quality of equity (capital buffers)
• Improvement of risk coverage
• Introduction of a maximum leverage ratio
• Reduction of pro-cyclicality by building countercyclical capital buffers
• Addressing systemic risk by imposing additional capital requirements for systemically important banks. In the Netherlands, ABN Amro, Rabobank, ING and SNS Bank are addressed as systemically important bank.

Further information?
Read more about Basel III here. Please contact Integrated Finance Solutions at +31 30 7602110.