Group of Central Bank Governors and Heads of Supervision reinforces Basel Committee reform package

Contingent capital: The Basel Committee is reviewing the role that contingent capital and convertible capital instruments could play in the regulatory capital framework. This includes possible entry criteria for such instruments in Tier 1 and/or Tier 2 to ensure loss absorbency and the role of contingent and convertible capital more generally both within the regulatory capital minimum and as buffers.

Liquidity: Based on information collected through the quantitative impact assessment, the Committee should flesh out the details of the global minimum liquidity standard, which includes both the 30-day liquidity coverage ratio and the longer term structural liquidity ratio.

Central Bank Governors and Heads of Supervision will review concrete proposals on each of these topics later this year.



They endorsed the Committee’s approach to extensive consultation on and comprehensive assessment of the proposed reforms, covering both the impact on the banking sector and the broader economy, before arriving at a final calibration of the minimum level of capital and the buffers above the minimum at the end of this year. They stressed that the aim of the new global standards should be to achieve a better balance between banking sector stability and sustainable credit growth. President Trichet noted that “the Group of Central Bank Governors and Heads of Supervision will provide strong oversight of the work of the Basel Committee during this phase, including both the completion and calibration of the reforms.”

The fully calibrated set of standards will be developed by the end of 2010 to be phased in as financial conditions improve and the economic recovery is assured with the aim of implementation by the end of 2012. This includes appropriate phase-in measures and grandfathering arrangements for a sufficiently long period to ensure a smooth transition to the new standards.

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