The BIS Capital Adequacy Exception

The Bank of International Settlements is a clearinghouse organization where financial institutions (banks) settle their short term transactions in large batches.
To participate, a bank must show adequate capital, because batching settlements effectively amounts to short-term credit.
In the early 1990s Japanese banks received a special exception to Bank of International Settlements rules to allow them to count unrealized gains (i.e., the inflated bubble-era stock values) to meet "capital adequacy" requirements.
- Later experience showed that much of these estimated gains would in fact not be realized (i.e., converted to more stable assets like cash).
Interestingly enough, to bolster reported profits Japanese banks sold stocks heavily 1994--1997, realizing smaller and smaller gains as the market declined, but in 1997 they exhausted this resource due to negative operating profits, and immediately the new rules for DTAs were introduced.