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Capital management of financial institutions and the related tax issues

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Published on 01 Apr 13 by "THE TAX SPECIALIST" JOURNAL ARTICLE

Against the background of the first anniversary of the global financial crisis, the leaders of the Group of 20 countries and the European Union met in September 2009 and agreed on basic principles for a set of reforms to strengthen the international financial regulatory system. These principles are now known as Basel III. The Basel III reforms cover the capital, liquidity and funding positions of banks. This article is focused on capital requirements. The article focuses on bank capital and bank capital management as the principles are similar for insurers, although relevant issues for insurers are also mentioned.

The article opens with an introduction to bank and insurance capital and the Basel III capital reforms. The article then discusses Tier 1 and Tier 2 securities, and the interaction of bank capital with ratings capital. The remainder of the article then examines tax issues for bank issuers, insurance issuers and investors.

Author profiles

Anthony Frost CTA
Photo of author, Tony FROST Tony Frost in his first, 34-year career was one of Australia’s leading corporate tax advisers. He was, and still is, a lawyer and a Chartered Accountant. His clients included BHP Billiton, Macquarie Bank, Westpac Banking Corporation and the Commonwealth Bank of Australia. Before joining Greenwoods in 2003, he had been a tax partner at PwC for seven years. Prior to that, Tony spent five years working in-house at Westpac Banking Corporation. Throughout his tax career, Tony was a regular speaker at TTI events. Tony finished his tax career in 2018, after being Managing Partner, for seven years, of tax advisory firm Greenwoods & Herbert Smith Freehills, one of Australia’s most lauded professional service firms. Since 2019, and after completing a Master of Science in Coaching Psychology degree at the University of Sydney, Tony has been having a second career as an executive coach, mentor, leadership consultant, facilitator and trainer. He holds a number of non-executive company directorships and is the non-executive Chairman of the Leadenhall Valuation Services group. Tony is a graduate of the Australian Institute of Company Directors and now teaches the AICD’s prestigious Company Directors’ Course. Tony is also the author of The Professional: A Playbook to Unleash Your Potential and Futureproof Your Success, Tony has been a proud member of The Tax Institute for about 40 years. - Current at 06 July 2026
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Tricia Ho-Hudson
Tricia is the Head of Capital & Regulatory Strategy at the Commonwealth Bank of Australia. Tricia’s team is responsible for management of the capital of the Commonwealth Bank and its subsidiaries (approximately $35 billion), as well as strategic implementation of financial regulatory reform generally. The team is also responsible for execution of all capital transactions. Tricia is a member of the Tax and Capital Management Working Group coordinated by the Australian Bankers Association. - Current at 13 February 2013
Julian Pinson
Julian Pinson, FTI is a Partner at PwC. Julian advises on a wide range of tax matters, with a focus on banking and financial services and M&A. Julian has particular expertise in cross-border finance, TOFA, corporate restructures, debt and equity raisings and M&A. - Current at 02 November 2023
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