When bankers read the consultative proposals published by the Bank for International Settlements (BIS) on December 17, 2009, some began to think that, in an attempt to prevent a repeat of the 2008 credit crunch, the world's financial regulators might be about to create a new crisis. The aim of increasing both the quantity and quality of capital, to avoid the need for massive government assistance to the financial sector in the future, is understandable.
But the BIS proposals contain a string of measures likely to force banks to deleverage further, or raise fresh capital. On the capital side, the regulators' forum is proposing a tighter definition of core Tier 1 (to exclude deferred tax assets and minority interests) and raising the pressure to hold a higher proportion of core Tier 1 in the total capital structure.
