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The impact for Spain of the new banking regulationsproposed by the Basel Committee

Jordi GualChief Economist and Head of Research, la Caixa

Meeting of the Group of Experts in the Banking Industry (GEBI)Brussels, June 14th 2010

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Agenda1. Overview of main regulatory proposals

2. Outline of the estimation approach

3. Capital requirements

4. Liquidity requirements

5. Results

6. Possible impact on monetary policy, banking businessand products

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1. Overview of regulatory proposals

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Identified problemsCurrent regulatory

proposals

Wholesale funding

(securitization)

Procyclical regulation

House prices

CompensationCompetition for market share

Misjudgement of risk

Ineffective supervision

Transparency (rating agencies)

Liquidity regulation

Countercyclical capital

Taxes

Monetary policy

Rules on compensation; taxes Revision of accounting rules

Quality and quantity of capital

More effective supervision

Restrictions on size Living wills

Central counterparties

Corporate governance

Overview over current regulatory proposals

Leverage

Credit

Risk

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Basel II New proposal (Basel III)

New definition of Core Capital

+ Capital

+ Reserves

+ Retained Earnings

+ Minority interests

Deductions:

Goodwill and intangibles

Revalorization reserves and others

+ Capital

+ Reserves

+ Retained Earnings

Deductions:

Goodwill and intangibles

Revalorization reserves and others Minority stakes in banks (>10%) and insurance (>20%)

Deferred tax assets

Shortfall of provision vs. expected loss

Other changes include:

Restrictions on hybrid capital in Tier 1

Increase of RWA for trading book

Procyclicality adjustments

Leverage ratio

Basel III proposal on solvency regulation

Specificminimum

requirement(to be defined)

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Two new liquidity ratios

Assets Liabilities

Availablestable

funding

Highlyliquid assets

Cash outflows(30 days)>