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Under Basel 2, capital requirements will depend on the rating of a borrower and the type of loan.
By issuing PPDS, societies will be able to convert subordinated debt, which is classified as tier 2 capital into tier 1 - or a firm's core equity.
Mainly as a result of the Basel 2 capital accords, many banks had put in new systems to calculate their aggregate exposure.
While this supported depositors, it also meant that Tier 2 capital instruments, mainly subordinated debt, "did not absorb losses incurred by certain large internationally active banks that would have failed had the public sector not provided support," the committee said.
It may be months before enough have been cauterised to give banks greater confidence to lend.A more hopeful line of endeavour is the international move to relax the Basel 2 capital regime for banks, which has tended to exacerbate capital requirements in the downturn.
The Swiss are introducing just such a ratio for their two biggest banks, which will be phased in by 2013, to sit alongside the international "Basel 2" capital rules.Basel 2 takes a different approach to capital, charging banks on the basis of how risky their assets are.
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It wants to strengthen risk-weighted capital measures that have been in operation, under the Basel 2 capital-adequacy rules, since the beginning of this year.
Rangers 2, Capitals 1. Series over.
New Enterprise Associates, Inc.: (27 deals) 2. Kleiner Perkins Caufield & Byers: (23 deals) 3. First Found Capital: (22 deals) 4. Sequoia Capital: (16 deals) 5. Intel Capital: (15 deals) 6.
As a complement to its new core-capital rules, the Basel club has made proposals that would also allow regulators to convert the most junior layer of banks' debt (known as Tier-2 capital) into shares if required.
Under a stressed scenario in which JGB yields move up or down by two percentage points, the loss the banks would suffer must not exceed 20% of Tier-1 and Tier-2 capital.
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