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
o Increase the quality of equity (capital buffers),
o Improvement of risk coverage,
o Introduction of a maximum leverage ratio,
o Reduction of pro-cyclicality by building countercyclical capital buffers,
o 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.

REGULATIONS

Regulations that should ensure these requirements are met include the following:

• Higher minimum capital requirements (tier 1-core capital ratio from 2% to 4,5%, tier 1-capital ratio will be increased to 6%, total capital ratio must be at least 8%),
•  Stricter rules to eligible capital: not all current instruments qualify as eligible tier 1 capital,
• New capital conservation buffer of 2.5 %,
• Introduction of a Liquidity Coverage Ratio of 60%,
• Supplemental 3% maximum leverage ratio,
• Depending on national circumstances, an additional contra-cyclical buffer of 2,5% will be required in times when lending increases disproportionally.

Implementation of these measures shall gradually come into effect, to be completed by January 2019.