|
|
|
|
|
|
Basel ii
Accord Section 28 to 34 |
|
III. Significant minority investments in
banking, securities and
other
financial
entities
28.
Significant minority investments in banking,
securities and other financial
entities,
where
control does not exist, will be excluded from
the banking group’s capital by
deduction
of
the equity and other regulatory investments.
Alternatively,
such investments might be, under certain
conditions, consolidated on a pro rata basis.
For example, pro rata consolidation may be
appropriate for joint ventures or where the
supervisor is satisfied that the parent is
legally or de facto expected to support the
entity on a proportionate basis only and the
other significant shareholders have the means
and the willingness to proportionately support
it.
The
threshold above which minority investments will
be deemed significant and be
thus
either deducted or consolidated on a pro-rata
basis is to be determined by
national
accounting
and/or regulatory practices. As an example, the threshold for
pro-rata inclusion in the European Union is
defined as equity interests of between 20% and
50%.
29.
The Committee reaffirms the view set out in the
1988 Accord that reciprocal crossholdings of
bank capital artificially designed to inflate
the capital position of banks will be deducted
for capital adequacy purposes.
IV.
Insurance entities
30.
A bank that owns an
insurance subsidiary bears the full
entrepreneurial risks of the
subsidiary
and should recognise on a group-wide basis the
risks included in the whole group.
When
measuring regulatory capital for banks, the
Committee believes that at this stage it
is,
in
principle, appropriate to deduct banks’ equity
and other regulatory capital investments
in
insurance
subsidiaries and also significant minority
investments in insurance entities.
Under
this approach the bank would remove from its
balance sheet assets and liabilities, as well as
third party capital investments in an insurance
subsidiary.
Alternative
approaches that can be
applied
should, in any case, include a group-wide
perspective for determining capital adequacy and
avoid double counting of
capital.
31.
Due to issues of competitive equality, some G10
countries will retain their
existing
risk weighting
treatment
(8) as an
exception to the approaches described above and
introduce
risk aggregation only on a consistent basis to
that applied domestically by
insurance supervisors for
insurance firms with banking
subsidiaries.9
The
Committee invites insurance
supervisors to develop further and adopt
approaches that comply with the above
standards.
(8) For banks using the
standardised approach this would mean applying
no less than a 100% risk weight, while for banks
on the IRB approach, the appropriate risk weight
based on the IRB rules shall apply to such
investments.
(9) Where the existing treatment
is retained, third party capital invested in the
insurance subsidiary (i.e. minority interests)
cannot be included in the bank’s capital
adequacy
measurement.
32.
Banks should disclose the national regulatory
approach used with respect to
insurance
entities in determining their reported capital
positions.
33.
The capital invested in a majority-owned or
controlled insurance entity may
exceed
the
amount of regulatory capital required for such
an entity (surplus capital). Supervisors may
permit the recognition of such surplus capital
in calculating a bank’s capital adequacy,
under
limited
circumstances.
(10)
National regulatory
practices will determine the parameters
and
criteria, such as legal transferability, for
assessing the amount and availability of surplus
capital that could be recognised in bank
capital. Other examples of availability criteria
include: restrictions on transferability due to
regulatory constraints, to tax implications and
to adverse impacts on external credit assessment
institutions’ ratings.
Banks
recognising surplus capital in insurance
subsidiaries will publicly disclose the amount
of such surplus capital recognised in their
capital. Where a bank does not have a full
ownership interest in an insurance entity (e.g.
50% or more but less than 100% interest),
surplus capital recognised should be
proportionate to the percentage interest held.
Surplus capital in significant minority-owned
insurance entities will not be recognised, as
the bank would not be in a position to direct
the transfer of the capital in an entity which
it does not control.
(10)
In a deduction approach, the amount deducted for
all equity and other regulatory capital
investments will be adjusted to reflect the
amount of capital in those entities that is in
surplus to regulatory requirements, i.e. the
amount deducted would be the lesser of the
investment or the regulatory capital
requirement. The amount representing the surplus
capital, i.e. the difference between the amount
of the investment in those entities and their
regulatory capital requirement, would be
risk-weighted as an equity investment. If using
an alternative group-wide approach, an
equivalent treatment of surplus capital will be
made.
34.
Supervisors will ensure that majority-owned or
controlled insurance
subsidiaries,
which
are not consolidated and for which capital
investments are deducted or subject to
an
alternative
group-wide approach, are themselves adequately
capitalised to reduce the
possibility
of future potential losses to the bank.
Supervisors
will monitor actions taken by the subsidiary to
correct any capital shortfall and, if it is not
corrected in a timely manner, the shortfall will
also be deducted from the parent bank’s
capital.
|
| | | |
|
Sarbanes Oxley
Training
Courses
designed to provide with the knowledge and skills needed to understand and
support Sarbanes-Oxley compliance.
www.sarbanes-oxley-training.com
Basel ii
Training
Courses
designed to provide with the knowledge and skills needed to understand and
support Basel ii compliance.
www.basel-ii-training.com
Sarbanes Oxley
Act
Sarbanes
Oxley Compliance: Books, Software, Certification, Training and
Resources.
www.sarbanes-oxley-act.biz
Basel ii Accord
Basel ii
Compliance: Books, Software, Certification, Training and
Resources
http://www.basel-ii-accord.com/
Compliance Training
Sarbanes
Oxley, Basel ii, Data Protection Directive, Information Security
Training
www.compliance-training.net
|
|