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| I. Preface | 4 |
| II. Conclusions of the Technical Committee | 5 |
| III. Background | 7 |
| IV. Capital Adequacy Test | 10 |
| A. Need for Capital Standard | 10 |
| B. Risks Addressed By Capital Adequacy Standard | 11 |
| | 1. Position Risk | 11 |
| | 2. Settlement/Counterparty Risk | 12 |
| | | a. Price Movements | 13 |
| | | b. Unsecured Claims and Free Deliveries | 14 |
| | | c. Funding Costs | 14 |
| | | d. International Initiatives in the Area Clearance and Settlement | 15 |
| | 3. Other Risks | 16 |
| C. Approaches to Capital Adequacy | 17 |
| | 1. Liquidity and Solvency | 17 |
| | 2. RiskBased Requirements | 19 |
| | 3. Minimum Requirements | 20 |
| | 4. Definition of Capital | 20 |
| V. Recordkeeping Requirements | 22 |
| VI. Reporting and Examination Structure | 23 |
Annex A
Segregation of Client Money and Securities | 24 |
Annex B
Differences between the Approach of Banking
Supervisors and Securities Regulators | 25 |
Annex C
Members of Working Group No. 3 of the
Technical Committee of the International
Organisation of Securities Commissions | 27 |
