§ Basel Committee on Banking Supervision International Convergence of Capital Measurement and Capital Standards A Revised Framework Updated November 2005 Requests for copies of publications, or for additions/changes to the mailing list, should be sent to: Bank for International Settlements Press & Communications CH-4002 Basel, Switzerland E-mail: publications@bis.org Fax: +41 61 280 9100 and +41 61 280 8100 © Bank for International Settlements 2005. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISBN print: 92-9131-669-5 ISBN web: 92-9197-669-5 i Table of Contents Abbreviations .............................................................................................................. i Introduction .............................................................................................................. 1 Part 1: Scope of Application ......................................................................................... 7 I. Introduction .............................................................................................................. 7 II. Banking, securities and other financial subsidiaries ................................................. 7 III. Significant minority investments in banking, securities and other financial entities .. 8 IV. Insurance entities ...................................................................................................... 8 V. Significant investments in commercial entities ......................................................... 10 VI. Deduction of investments pursuant to this part ......................................................... 10 Part 2: The First Pillar ─ Minimum Capital Requirements ......................................... 12 I. Calculation of minimum capital requirements ........................................................... 12 A. Regulatory capital .............................................................................................. 12 B. Risk-weighted assets ......................................................................................... 12 C. Transitional arrangements ................................................................................. 13 II. Credit Risk ─ The Standardised Approach ............................................................... 15 A. Individual claims ................................................................................................ 15 1. Claims on sovereigns ................................................................................. 15 2. Claims on non-central government public sector entities (PSEs) ............... 16 3. Claims on multilateral development banks (MDBs) .................................... 17 4. Claims on banks ......................................................................................... 17 5. Claims on securities firms ........................................................................... 19 6. Claims on corporates .................................................................................. 19 7. Claims included in the regulatory retail portfolios ....................................... 19 8. Claims secured by residential property ....................................................... 20 9. Claims secured by commercial real estate ................................................. 20 10. Past due loans ............................................................................................ 21 11. Higher-risk categories ................................................................................. 21 12. Other assets ............................................................................................... 22 13. Off-balance sheet items .............................................................................. 22 B. External credit assessments .............................................................................. 23 1. The recognition process ....................