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Finance Act 2012

Background Note

8.Basel III is a comprehensive set of reform measures developed by the Basel Committee on Banking Supervision, designed to strengthen the regulation, supervision and risk management of the banking sector in response to the financial sector crisis.

9.The Basel III proposals will be implemented into EU law through changes to the existing Capital Requirements Directive, referred to as CRD 4. These will include an EU Regulation (CRR) and an EU Directive (CRD) which will be implemented through national law. These changes are due to commence from 1 January 2013.

10.In response to these changes financial institutions will have to issue new forms of capital that meet the conditions required for regulatory capital. This new power allows HM Treasury to make Regulations that set out the tax and stamp duty treatment of such securities, providing financial institutions with certainty and clarity of tax treatment.

11.The new power is not limited to Basel III securities it will also allow HM Treasury to make Regulations in respect of the tax consequences in relation to securities issued by authorised persons under FSMA 2000 under other regulatory regimes imposed by UK or EU legislation.

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