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Basel Committee Issues FAQs on Basel III definition of Capital

The Basel Committee on Banking Supervision issued Frequently Asked Questions (FAQs) on the Basel III definition of Capital.  Several of the items may be beneficial for credit unions, notably the following:

  • Q. 5 - stating that paid-in capital should preferably be paid-in using cash, which helps support including credit unions and other cooperative shares as regulatory capital;
  • Q. 6 - allowing for dividends to be paid out of reserves (provided all minimum capital ratios are met); 
  • Q. 16 - revising the guidance on the permitted trigger levels and write-down mechanisms for Additional Tier 1 capital instruments accounted for as liabilities through principal loss absorption through a conversion or write-down; and
  • Q. 19 - stating that subordinated debt can qualify as Additional Tier 1 or Tier 2 capital.

The FAQs can be viewed here.