Fast Facts: BASEL REFORMS
August 27, 2010
The following information is taken from the Basel Committee on Banking Supervision; Macroeconomic Assessment Group; Institute of International Finance
FACT: In 2009, the Basel Committee on Banking Supervision (BCBS) proposed new capital and liquidity requirements (commonly known as Basel III), including:
- · Raising the quality of Tier 1 capital
- · Strengthening counterparty capital requirements
- · Introducing a leverage ratio, harmonized internationally
- · Building-up capital buffers for times of stress
- · Instituting a global minimum liquidity standard
FACT: Over the next four and a half years, GDP will decrease by 0.19% to 0.22% for every 1% increase in overall capital standards, according to the Macroeconomic Assessment Group’s interim report, released August 18, 2010.
FACT: By 2015, the U.S. will have lost 4.58 million jobs if regulatory reforms are implemented, according to the Institute of International Finance.
FACT: Basel reforms have the potential to: increase interest rates, reduce lending, increase non-performing loans, and make it difficult for small and medium firms to obtain financing, according to the Macroeconomic Assessment Group.
FACT: BCBS will discuss Basel III at the upcoming G-20 Summit in Seoul on November 11-12. A fully calibrated set of standards will be announced by the end of 2010.
This report is also attached as a PDF. If you have questions or comments, please do not hesitate to contact Abby McCloskey, Director of Research at the Financial Services Roundtable, at abbyresearch@fsround.org. Feel free to share this information internally or externally.
Explanations
Tier 1 Capital consists of equity capital and disclosed reserves.
Counterparty capital requirements will protect each party from risks arising from derivatives, repos, and securities financing activities.
Leverage Ratio will build on Basel II to contain excess leverage in the banking system.
Countercylical Capital Buffer is capital built up in good times that can be drawn upon in periods of stress.
Liquidity Standard will include a 30-day liquidity coverage requirement and a long-term liquidity requirement.
For more information, please visit http://www.bis.org
Fast Facts: CREDIT CARDS
August 20, 2010
The following data is taken from the Federal Reserve’s H.8 report; Fitch Credit Card Index
FACT: In June 2010, card users paid back 19.61% of their balances – a 14% increase compared to June 2009. This is the highest payback rate in 29 months.
FACT: In June 2010, late payments improved for the sixth consecutive month and dipped below the 4% threshold for the first time in 18 months.
FACT: Write-offs of uncollectable credit card debt improved for the first time since January 2007. Write-offs occur when loans are 180 days past due.
FACT: In July 2010, commercial banks had $638.2 billion credit card loans extended to consumers, compared to $359.8 billion in July 2009. That is a 77% increase in lending.
FACT: The last set of rules from the Credit Card Accountability, Responsibility and Disclosure (CARD) Act will go into effect on Sunday, August 22, including:
- · No fees over $25
- · No multiple fees for a single transaction
- · No inactivity fees
- · Explanation required for increased APR.
- · APR increases must be re-evaluated every six months.
For more information, please visit www.federalreserve.gov
This report is also attached as a PDF. If you have questions, comments, or suggestions for future topics, please contact Abby McCloskey, Director of Research at the Financial Services Roundtable, at abbyresearch@fsround.org.
Sources
Fitch's Credit Card Index tracks more than $40 billion of retail or private label credit card ABS backed by approximately $55 billion of principal receivables.
Fast Facts: BANK BALANCE SHEETS
August 13, 2010
The following data is taken from the Federal Reserve’s H.8 report - Assets and Liabilities of Commercial Banks in the U.S; the FDIC Statistics on Depository Institution; and NYSE
Despite the fact that the number of commercial banks and savings institutions on the FDIC’s “Problem List” is increasing, bank balance sheets are stronger overall.
FACT: Tier 1 capital is the core measure of a bank’s financial strength. From March 31, 2007 to March 31, 2010 (the most recent FDIC data available), commercial banks:
- § Increased their capital reserves by 31%.[1]
- § Increased Tier 1 capital by $242 billion, or 38%.
- § Increased Tier 1 capital as a percentage of assets from 7.17% to 8.13%.
FACT: Total assets for commercial banks decreased by $177.3 billion between June 2009 and June 2010. However, total liabilities decreased by more – $288.8 billion, meaning that banks net $111.5 billion year-over-year.
FACT: 62% of our member companies reported higher earnings in Q2 2010 than in Q2 2009. Overall, reported earnings are $12.79 billion higher than this same period last year.
FACT: Aggregate lending decreased by 1.5% between June 2009 and June 2010, but consumer credit increased by nearly 40%. Banks provided $1,167 billion outstanding credit to consumers in June 2010, compared to $813.0 billion in January 2010 and $856.9 billion in June 2009.
This report is also attached as a PDF. If you have questions or comments, please do not hesitate to contact Abby McCloskey, Director of Research at the Financial Services Roundtable, at abbyresearch@fsround.org.
Definitions
Tier 1 Capital consists of equity capital and disclosed reserves.
Tier 1 Capital Ratio is the ratio of a bank's core equity capital to its total assets.
Problem Institutions are those institutions with financial, operational, or managerial weaknesses that threaten their continued financial viability.
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[1] This does not factor in asset growth. Assets increased 21% over this same period. Thus, holding asset growth constant, bank reserves increased 10% and Tier 1 capital increased by 17%.
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