Introduction

1. To reduce excessive variability of risk-weighted assets and to enhance the comparability of risk-weighted capital ratios, banks will be subject to a floor requirement that is applied to risk-weighted assets. The output floor will ensure that banks' capital requirements do not fall below a certain percentage of capital requirements derived under standardised approaches.

Output floor requirements

2. As set out in the Basel III framework, banks must meet the following capital requirements:

- Common Equity Tier 1 must be at least 4.5% of risk-weighted assets at all times.

- Tier 1 capital must be at least 6.0% of risk-weighted assets at all times.

- Total Capital (Tier 1 capital and Tier 2 capital) must be at least 8.0% of risk-weighted assets at all times [The Basel III framework].

3. In addition, a Common Equity Tier 1 capital conservation buffer is set at 2.5% of risk-weighted assets for all banks [As set out in the Basel III framework.]. Banks may also be subject to a countercyclical capital buffer requirement. Banks identified as global systemically-important banks (G-SIBs) are also subject to additional higher-loss absorbency requirements and total loss-absorbing capacity requirements [As set out in the FSB TLAC term sheet.].