Updates to frequently asked questions (FAQs) on the definition of capital were published Sept. 19 by the Basel Committee (the international group that recommends capital benchmarks for financial institutions). The FAQs are supplemented by two flowcharts added to the annex to the document, which are designed to aid understanding of the application of the Basel III transitional arrangements to capital instruments issued by banks.
According to the Bank for International Settlements, the FAQs correspond to the definition of capital sections of the Basel III standards and 2011 statement on the loss absorbency of capital “at the point of non-viability.”
The BIS said, in a release, that the FAQs are in addition to those previously published in July 2011, October 2011 and December 2011. The questions are grouped according to the relevant paragraphs of the rules text; FAQs added since the publication of the third version of this document, BIS said, are listed at the start of the document and marked in italics.
Basel III definition of capital – Frequently asked questions