Risk Library
   Documents by Author
     Committees at the Bank for International...
       International Convergence of Capital Mea...
         Part III. A target standard ratio


International Convergence of Capital Measurement and Capital Standards

Part III. A target standard ratio

44. In the light of consultations and preliminary testing of the framework, the Committee is agreed that a minimum standard should be set now which international banks generally will be expected to achieve by the end of the transitional period. It is also agreed that this standard should be set at a level that is consistent with the objective of securing over time soundly-based and consistent capital ratios for all international banks. Accordingly, the Committee confirms that the target standard ratio of capital to weighted risk assets should be set at 8% (of which the core capital element will be at least 4%). This is expressed as a common minimum standard which international banks in member countries will be expected to observe by the end of 1992, thus allowing a transitional period of some four-and-a-half years for any necessary adjustment by banks who need time to build up to those levels. The Committee fully recognises that the transition from existing, sometimes long-established, definitions of capital and methods of measurement towards a new internationally agreed standard will not necessarily be achieved easily or quickly. The full period to end-1992 is available to ensure progressive steps towards adjustment and banks whose ratios are presently below the 8% standard will not be required to take immediate or precipitate action.


Contact us * Risk Library * Documents by Author * Committees at the Bank for International Settlement (BIS) * International Convergence of Capital Measurement and Capital Standards