New Banking Rules

A global panel, the 27-nation Basel Committee on Banking Supervision, has been brain-storming since 2008 to come up with a regulatory framework to avoid a financial meltdown like the ones witnessed in 2008. On September 12, the panel outlined many of the measures, including:

* Raising the so-called tier 1 capital, also known as capital reserve, to 4.5% of the total balance sheet in 2013 and eventually raising it to 6% in 2019.

* Requiring banks to keep an emergency reserve, "conservation buffer", at the 2.5% of the balance sheet.

* Allowing individual nations to demand banks to build up further reserves during good times, also known as "countercyclical buffer", at 2.5% as a cushion against excessive lending during economic good times.

* Introducing a leverage ratio of 3%, implying banks have to keep at least 3% of total assets, including derivatives or other instruments that they might not carry on their balance sheets.

* Agreeing on working towards additional safeguards for "systemetically important banks".

The new rules are expected to be endorsed by the G-20 summit in November to be held at Seoul, and to be phased in starting January 1, 2013.