Listing to live

When implemented sometime during 2008, the Basel II Capital Accord will demonstrate that the entire Lebanese banking sector will be in need of extra capital to cover up the underlying risk of their assets. Most banks are expected to see a drop in their capital adequacy ratio (equity divided by risk weighted assets) from an average of 21% for the sector to a level below 6%-5% (for some banks even more). Lebanese banks’ capital adequacy ratio will then be below the minimum regulatory capital ratio of 12% as established by the Banking Control Commission (BCC) a few years ago. In other words, the entire Lebanese banking system will need a whopping $5.7 billion (current equity is $4.3 billion) of extra capital in order to reach the minimum regulatory capital adequacy ratio of 12%, or $2.6 billion if the BIS CAR is to reach 8%. This sudden drop in capital adequacy