Tier 2 capital includes supplementary items such as qualifying subordinated debt and a portion of the allowance for loan and lease losses. See 12 CFR part 225, Appendix A for a full discussion of the items included in Tier 2 capital and the associated limits, restrictions and deductions. Tier 1 common capital as defined for the Supervisory Capital Assessment Program is the portion of Tier 1 capital that is common equity, or Tier 1 capital less perpetual preferred stock, minority interests and trust preferred securities that qualified as Tier 1 capital. Tangible common equity is defined as total equity capital less perpetual preferred stock and related surplus (net of related treasury stock), goodwill and other intangible assets. Four capital ratios are also calculated. The denominator for three ratios – the Tier 1 risk-based capital ratio, the total risk-based capital ratio and the Tier 1 common capital ratio – is risk-weighted assets. The denominator for the tangible common equity ratio is tangible assets, defined as total assets less goodwill and other intangible assets. 5  It had been under 2 percent. 6  These guidelines apply to the individual bank subsidiaries within a bank holding company. BIS central bankers’ speeches  3  Figure 3 highlights that since the worst phase of the crisis, 15 large U.S. banking organizations that have reported continuously through the crisis have made significant progress in improving both the quality and quantity of their capital.

Malaysia is honoured to host the Islamic Financial Services Board and is committed to the development of a sound. Islamic financial services industry. Ladies and Gentlemen: Islamic banking and finance is ascending to greater prominence in the global financial system and has fast extended beyond the traditional predominantly Muslim economies to major industrial economies. This growing significance is a manifestation of the viability of Islamic banking as a financial intermediation channel that supports economic growth and development of nations. While it was initially developed to fulfill the needs of the Muslims, Islamic banking and finance has now gained universal acceptance. The appreciation of its promising potential has prompted interest amongst conventional financial institutions to venture into this fast expanding market. In essence, Islamic banking and finance can expect to evolve into an increasingly important component of the global financial system. At the heart of this expansion, emerged the need for the development of the regulatory dimension to explicitly address the unique features of Islamic banking and finance. At present, Islamic financial institutions have, to a large extent, been governed by the conventional regulatory framework, reinforced by the Shari'ah framework and Islamic accounting standards. However, Islamic finance is distinct from conventional financial activities in terms of its underlying philosophy on the prohibition of interest, which in turn shapes the nature of its financial transactions, and its risk attributes. A separate regulatory framework therefore needs to be developed in view of the unique risks in Islamic financial transactions to provide for their effective assessment and management.