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32.288 12.4115V8.75844H25.5788V45H32.6558V30.9065C33.8476 33.0924 35.8412 34.189 38.6293 34.189C41.4175 34.189 43.6318 33.0776 45.3532 30.8472C47.0747 28.6168 47.9354 25.312 47.9354 20.918C47.9354 16.7907 47.082 13.6415 45.3753 11.4853" fill="white"/> <path d="M54.712 0.00905357L50.8782 3.87061L54.712 7.73216L58.5457 3.8706L54.712 0.00905357Z" fill="white"/> </g> <defs> <clipPath id="clip0_162_42"> <rect width="343" height="45" fill="white"/> </clipPath> </defs> </svg> </a> </div> <div class="menu_holder"> <div class="menu-primary-menu-container flex align--center"><ul id="header-nav" class="menu"><li id="menu-item-20" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-home menu-item-20"><a href="https://stopbaselendgame.com/">Home</a></li> <li id="menu-item-14" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-14"><a href="https://stopbaselendgame.com/one-pagers/">One-pagers</a></li> <li id="menu-item-321" class="menu-item 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Capital</span></div><div><span>Works</span><div class="underline"></div></div> </div> <div class="site_copy"> <p>When capital requirements are set excessively high, it makes it much harder to secure a loan or credit—this is especially true for working families and small businesses.</p> </div> </div> <div class="capital_slide_image"> <div class="video_row_module_right_inner" style="background-image: url('');"> <div style="padding: 56.25% 0 0 0; position: relative;"><iframe style="position: absolute; top: 0; left: 0; width: 100%; height: 100%;" title="Hype Reel_Preview_V3" src="https://player.vimeo.com/video/859820714?h=5a11c290a5&badge=0&autopause=0&player_id=0&app_id=58479" frameborder="0"></iframe></div> <p><script src="https://player.vimeo.com/api/player.js"></script></p> </div> </div> </div> <div class="capital_slide slide2 scroll-snap"> <div class="slide_2_top">Let’s Start by defining capital</div> <div class="slide_2_left"> <p>Capital is the amount by which a company’s assets exceed its liabilities. For example, suppose a baker invests $600,000 into building a bakery financed with both $100,000 of their own money and a bank loan for $500,000. The bakery’s assets are worth $600,000, while its liabilities equal $500,000, <strong>leaving $100,000 in capital – the amount the baker invested.</strong></p> <p>For banks, capital is the difference between the assets of the bank (loans and securities) and the liabilities of the bank (deposits and other borrowings).</p> </div> <div class="slide_2_right"> <img src="https://stopbaselendgame.com/wp-content/uploads/2023/08/Basel-Graphic-Design-Files-0-1.png"/> </div> </div> <div class="capital_slide slide3 scroll-snap"> <div class="slide3_top"> <div class="slide3_eyebrow">Higher Capital Affects Lending.</div> <div class="slide3_underlined"> <div><span>Too much capital has</span><div class="underline"></div></div><br> <div><span>consequences.</span><div class="underline"></div></div> </div> </div> <div class="slide3_bottom"> <p>Having a strong capital base is important because capital absorbs losses to the bank (for example, when someone doesn’t pay back a loan).</p> <p>While having a large amount of capital makes a bank safer, funding bank loans and other activities with capital (money raised by selling equity shares or retaining income) is more expensive than funding it with debt (money raised through borrowings including deposits).</p> <p>As a result, the more a bank funds itself with capital, the more it must charge for loans. In other words, the supply of bank credit for businesses and households falls.</p> </div> </div> <div class="capital_slide slide4 scroll-snap"> <div class="slide4_top"> <div class="slide4_top_left"> <div>How does the basel</div><br> <div>endgame approach</div><br> <div><span>differ from other</span><div class="underline"></div></div><br> <div><span>countries’ capital</span><div class="underline"></div></div><br> <div><span>standards?</span><div class="underline"></div></div> </div> <div class="slide4_top_right"> <p>One of the original goals for the Basel proposal was to make international standards consistent, but the U.S. is implementing standards that vary widely from its global peers. Other countries understand the effect of higher capital requirements will have on people and the economy, and they are implementing requirements that are more thoughtful and tailored than what the U.S. has proposed.</p> </div> </div> <div class="table"> <table cellpadding="0" cellspacing="0"> <tr> <th class="purple">Component</th> <th class="purple wide">Basel</th> <th class="grey"><img src="/wp-content/uploads/2023/08/istockphoto-465702446-612x612-1.jpg"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/UK_union_flag_preview_cc70.png"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/istockphoto-537287287-612x612-1.jpg"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/istockphoto-934017954-612x612-1.jpg"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/360_F_23486262_CoS2Sxd2fHL170D5jMqdrO9n2q8sQ4nS.jpg"/></th> </tr> <tr> <td class="grey"><strong>Credit Risk</strong></td> <td class="wide"> <ul> <li>IG counterparties eligible for lower risk weight</li> <li>Counterparties must have publicly listed securities to receive lower RW</li> </ul> </td> <td> Public listing not required </td> <td> Public listing not required </td> <td> Public listing not required </td> <td> Public listing requirement waived if annual sales > CAD 75mm </td> <td> Public listing required </td> </tr> <tr> <td class="grey"><strong>SFTs</strong></td> <td class="wide"> <ul> <li>Implement minimum haircut floor</li> <li>Minimum haircut floor not applicable to banks "in jurisdictions that are prohibited from conducting such transactions below the minimum haircut floors"</li> </ul> </td> <td> Not Implemented </td> <td> Not Implemented </td> <td> Not Implemented </td> <td> Not Implemented </td> <td> Implements minimum haircut floors </td> </tr> <tr> <td class="grey"><strong>Derivatives</strong></td> <td class="wide"> <ul> <li>Introduces SA-CCR</li> <li>Gross-up all SA-CCR exposure by 40%</li> </ul> </td> <td> No gross-up in the output floor </td> <td> No gross-up for non-financials and personal funds </td> <td> Gross-up all SA-CCR exposure by 40% </td> <td> Gross-up all SA-CCR exposure by 40% </td> <td> N/A for US due to elimination of bank models for credit risk </td> </tr> <tr> <td class="grey"><strong>CVA</strong></td> <td class="wide"> <ul> <li>Introduces revised CVA methodologies with less granular risk weights and no exemptions</li> </ul> </td> <td> End-user exemptions for CVA </td> <td> More granular risk weights for financials </td> <td> No exemptions </td> <td> No exemptions </td> <td> No exemptions </td> </tr> <tr> <td class="grey"><strong>Op Risk</strong></td> <td class="wide"> <ul> <li>Firms must calculate a standardized operational risk requirement comprised of a business indicator and loss component (including ILM)</li> </ul> </td> <td> ILM set to 1 </td> <td> ILM set to 1 </td> <td> ILM set to 1 only if business indicator is < JPY 100bn </td> <td> No changes </td> <td> ILM > 1 based on historical losses (and floored at 1) </td> </tr> </table> </div> <div class="dark_blue"> <div class="phone2action_101"> <div id="form-anchor"> <script type="text/javascript"></script> <div class='gf_browser_ie gf_browser_ie7 gform_wrapper gravity-theme gform-theme--no-framework' data-form-theme='gravity-theme' data-form-index='0' id='gform_wrapper_1' > <div class='gform_heading'> <h2 class="gform_title">Stay Informed</h2> <p class='gform_description'></p> </div><form method='post' enctype='multipart/form-data' id='gform_1' action='/capital-101/' data-formid='1' novalidate> <div class='gform-body gform_body'><div id='gform_fields_1' class='gform_fields top_label form_sublabel_above description_below validation_below'><div id="field_1_4" class="gfield gfield--type-html gfield--input-type-html gfield--width-full gfield_html gfield_html_formatted gfield_no_follows_desc field_sublabel_above gfield--no-description field_description_below field_validation_below gfield_visibility_visible" data-js-reload="field_1_4" ><br/></div><fieldset id="field_1_2" class="gfield gfield--type-name gfield--input-type-name font-family: 'Open Sans', sans-serif; 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Other countries understand the effect of higher capital requirements will have on people and the economy, and they are implementing requirements that are more thoughtful and tailored than what the U.S. has proposed.</p> </div> <div class="table"> <table cellpadding="0" cellspacing="0"> <tr> <th class="purple">Component</th> <th class="purple wide">Basel</th> <th class="grey"><img src="/wp-content/uploads/2023/08/istockphoto-465702446-612x612-1.jpg"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/UK_union_flag_preview_cc70.png"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/istockphoto-537287287-612x612-1.jpg"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/istockphoto-934017954-612x612-1.jpg"/></th> <th class="grey"><img src="/wp-content/uploads/2023/08/360_F_23486262_CoS2Sxd2fHL170D5jMqdrO9n2q8sQ4nS.jpg"/></th> </tr> <tr> <td class="grey"><strong>Credit Risk</strong></td> <td class="wide"> <ul> <li>IG counterparties eligible for lower risk weight</li> <li>Counterparties must have publicly listed securities to receive lower RW</li> </ul> </td> <td> Public listing not required </td> <td> Public Listing not required </td> <td> Public Listing not required </td> <td> Public Listing requirement waived if annual sales > CAD 75mm </td> <td> Public Listing required </td> </tr> <tr> <td class="grey"><strong>SFTs</strong></td> <td class="wide"> <ul> <li>Implement minimum haircut floor</li> <li>Minimum haircut floor not applicable to banks "in jurisdictions that are prohibited from conducting such transactions below the minimum haircut floors"</li> </ul> </td> <td> Not Implemented </td> <td> Not Implemented </td> <td> Not Implemented </td> <td> Not Implemented </td> <td> Implements minimum haircut floors </td> </tr> <tr> <td class="grey"><strong>Derivatives</strong></td> <td class="wide"> <ul> <li>Introduces SA-CCR</li> <li>Gross-up all SA-CCR exposure by 40%</li> </ul> </td> <td> No gross-up in the output floor </td> <td> No gross-up for non-financials and personal funds </td> <td> Gross-up all SA-CCR exposure by 40% </td> <td> Gross-up all SA-CCR exposure by 40% </td> <td> N/A for US due to elimination of bank models for credit risk </td> </tr> <tr> <td class="grey"><strong>CVA</strong></td> <td class="wide"> <ul> <li>Introduces revised CVA methodologies with less granular risk weights and no exemptions</li> </ul> </td> <td> End-user exemptions for CVA </td> <td> More granular risk weights for financials </td> <td> No exemptions </td> <td> No exemptions </td> <td> No exemptions </td> </tr> <tr> <td class="grey"><strong>Op Risk</strong></td> <td class="wide"> <ul> <li>Firms must calculate a standardized operational risk requirement comprised of a business indicator and loss component (including ILM)</li> </ul> </td> <td> ILM set to 1 </td> <td> ILM set to 1 </td> <td> ILM set to 1 only if business indicator is <JPY 100bn. </td> <td> No changes </td> <td> ILM > 1 based on historical losses (and floored at 1) </td> </tr> </table> </div> <div class="phone2action"> <img src="/wp-content/uploads/2023/08/Group-23015.png"/> </div> </div> --> <!-- <div class="capital_slide_image"> <img src="/wp-content/uploads/2023/08/slide4.jpg"/> </div> --> <footer id="colophon" class="site-footer" style="background-image: url('/wp-content/uploads/2023/08/footer_background-scaled.jpg');"> <div class="footer_left"> <div class="footer_logo"> <a href="/"> <svg width="343" height="45" viewBox="0 0 343 45" fill="none" xmlns="http://www.w3.org/2000/svg"> <g clip-path="url(#clip0_162_42)"> <path d="M20.4954 38.1459H0V45H20.4954V38.1459Z" fill="white"/> <path d="M58.3081 38.1459H38.0554V45H58.3081V38.1459Z" fill="white"/> <path d="M58.3302 10.7813H51.0325V33.6703H58.3302V10.7813ZM15.1619 21.1922C15.1619 24.2969 14.772 26.3939 13.9848 27.4683C13.1977 28.5427 12.2045 29.0836 10.9981 29.0836C9.98286 29.0836 9.11479 28.6391 8.38649 27.7499C7.65819 26.8607 7.29772 25.5492 7.29772 23.8004V19.0359C7.29772 17.1612 7.65083 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