Transactions that reduce regulatory capital requirements for banks have recently come under media and regulatory scrutiny. The New York Times characterized them as a “trading sleight of hand.” The Basel Committee on Banking Supervision has proposed limiting the ways in which capital requirements can be reduced by such transactions. This client note discusses the new Basel proposals in light of prior guidance published by Basel and the Federal Reserve. As banks seek ways to meet heightened capital requirements and surcharges that are being implemented, they may find greater difficulties in reducing their exposures.