Changes to Basel capital requirements and intangibles

Earlier today, the Basel Committee on Banking Supervision of the Bank of International Settlements reached some agreement on a bank reform issue — specifically on what constitutes “capital” that banks have to hold as part of their reserve requirements (see press release and story in the Wall Street Journal). The agreement allows certain assets such as deferred-taxes, mortgage-servicing rights and minority interests in other financial institutions to be counted as “Tier 1” capital subject to a 15% limit. I have no problem limiting such assets to 15%. However, I would like to see a consistent approach on what intangible assets are explicit included or excluded — even in that 15%. If they can count mortgage servicing rights as capital, they should be able to count other intangibles as capital as well.
BTW, the agreement also settles a technical issue concerning treating software as an intangible by creating a option to use the IFRS rules.

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