When capital requirements are set excessively high, it makes it much harder to secure a loan or credit—this is especially true for working families and small businesses.
Capital is the amount by which a company’s assets exceed its liabilities. For example, suppose a baker invests $600,000 into building a bakery financed with both $100,000 of their own money and a bank loan for $500,000. The bakery’s assets are worth $600,000, while its liabilities equal $500,000, leaving $100,000 in capital – the amount the baker invested.
For banks, capital is the difference between the assets of the bank (loans and securities) and the liabilities of the bank (deposits and other borrowings).
One of the original goals for the Basel proposal was to make international standards consistent, but the U.S. is implementing standards that vary widely from its global peers. Other countries understand the effect of higher capital requirements will have on people and the economy, and they are implementing requirements that are more thoughtful and tailored than what the U.S. has proposed.
||Public listing not required||Public listing not required||Public listing not required||Public listing requirement waived if annual sales > CAD 75mm||Public listing required|
||Not Implemented||Not Implemented||Not Implemented||Not Implemented||Implements minimum haircut floors|
||No gross-up in the output floor||No gross-up for non-financials and personal funds||Gross-up all SA-CCR exposure by 40%||Gross-up all SA-CCR exposure by 40%||N/A for US due to elimination of bank models for credit risk|
||End-user exemptions for CVA||More granular risk weights for financials||No exemptions||No exemptions||No exemptions|
||ILM set to 1||ILM set to 1||ILM set to 1 only if business indicator is < JPY 100bn||No changes||ILM > 1 based on historical losses (and floored at 1)|