Alert June 28, 2011

Oversight Body of Basel Committee Issues Statement on Capital Surcharge for Largest Banks

The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, issued a statement providing that the capital surcharge that will be imposed on global systemically important banks will be in the range of 1% to 2.5%, depending on the bank’s systemic importance.  This capital surcharge, which was smaller than feared by many in the industry, must be met with Common Equity Tier 1 capital, and is in addition to the 7% Common Equity Tier 1 capital ratio requirement generally imposed on all banks by Basel III.  In addition, to “provide a disincentive for banks facing the highest charge to increase materially their global systemic importance in the future, an additional 1% surcharge would be applied in such circumstances.”