Contingency plans

Following recent issues of contingent capital by Lloyds Banking Group and Rabobank, other firms are eyeing similar issuance as a means of meeting higher capital requirements in a cost-effective way. But the Basel Committee, which is due to discuss the subject at its July meeting, is struggling to draw up concrete proposals. Joel Clark reports

There are many unknowns about the future shape of the regulatory capital framework, but one thing seems certain – banks will have to hold more capital than in the past. While there have been some attempts to quantify the capital increases caused by the proposed changes to Basel II, the exact magnitude won’t be known until later this year, when the measures are properly calibrated. But given the very tight time frame – the reforms are supposed to be implemented by the end of 2012 – banks are