Disadvantages Of Single Rulebook

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2.1.5 Single Rulebook
The single rulebook gives support to the banking union and it is important to the financial sector regulation in the EU in general. It consists of legal acts that all financial institutions in the EU must follow. The single rulebook, among other things:
• highlights capital requirements for banks
• makes better protection for depositors
• regulates the prevention and management of bank failures
The single rulebook is based on pillars- the rules are most important for the banking union - are:
• capital requirements directive IV (CRD IV) and capital requirements regulation (CRR)
• amended directive on deposit guarantee schemes (DGS)
• bank recovery and resolution directive (BRRD) (http://www.consilium.europa.eu/en/policies/banking-union/single-rulebook/)
The Capital Requirements Directive IV (CRD IV)
This directive as part of the Basel III requirements is passed into member states' national law, stating the guidelines on
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The risk-weighted assets refer to safer assets are attributed a lower allocation of capital, while riskier assets are given a higher risk-weight. Moreover, the riskier the assets, the more capital the bank has to set aside. The capital is assigned certain grades according to its quality and risk. Tier 1 capital is considered to be the going concern capital. The going concern capital allows a bank to continue its activities and keep it solvent. The highest quality of Tier 1 capital is called common equity tier 1 (CET1) capital. Tier 2 capital is considered to be gone concern capital. The gone concern capital permits an establishment to repay depositors and senior creditors if a bank became insolvent. A minimum total capital ratio that banks and investment firms are required to hold should be equal to at least 8%.

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