Basel II was implemented by many banks in the U.S. and many other countries in 2009 and 2010.  The Basel II provisions  related to residential mortgages and mortgage insurance may provide incentives to certain of our bank customers not to insure  mortgages having a lower risk of claim and to insure mortgages having a higher risk of claim. In September 2010, the BCBS released the third Basel Capital  Accord (“Basel III”) guidelines, which will increase the  capital requirements of certain banking or ganizations. Implementation of Basel III requires formal regulations, and in  December 2010, the BCBS released a new bank capital framework (“Basel III capital adequacy guidelines”) that is intended to  significantly raise minimum capital requirements for banks. Implementation of the Basel III capital adequacy guidelines in the  U.S. requires the three federal banking regulators to issue legally binding rules. In June 2012, the agencies released Basel III  proposed rules. The proposed Basel III rules would, among other things, assign risk-weightings based on a residential  mortgage’s LTV ratio. However, the proposed rules do not recognize private mortgage insurance as a factor that reduces risk for  high LTV loans because of the “varying degree of financial strength” of private mortgage insurers.  Therefore, a loan with a 5%  down payment that is insured by private mortgage insurance would be considered as having a 95% L TV for minimum capital  requirement purposes. Additionally, while private mortgage insurance is not recognized, FHA-insured loans retain a risk  weighting of zero, which could make FHA-insured loans more attractive than privately-insured loans for those loans held for  investment. The deadline for comments on the proposed rules ended in October 2012. Several mortgage insurance industry  participants, as well as other housing market participants, have submitted comments to the regulators suggesting that, instead of  refusing to recognize private mortgage insurance in determining risk-weightings altogether , regulators should work with the  private mortgage insurance industry to design a method to test the financial strength and claims paying adequacy of individual  private mortgage insurance companies. The federal banking regulators have not yet finalized the rules.  While the timing for the  final rulemaking is unclear, currently it is expected to be finalized in the first half of 2013.  The new rules are likely to  significantly increase the capital requirements for mortgages, and thus could have a restraining impact on the recovery of the  housing market. Until the rules are finalized, we will not be able to evaluate the potential ef fects of the Basel III guidelines on  the housing market or our business. See “Risk Factors— The implementation of the Basel II capital adequacy requirements and the Basel III guidelines may  discourage the use of mortgage insurance .” By reason of Radian Insurance’ s authorization, in September 2006, to conduct insurance business through a branch in  Hong Kong, we are subject to regulation by the Hong Kong Insurance  Authority (“HKIA”). The HKIA’s principal purpose is to  supervise and regulate the insurance industry , primarily for the protection of policyholders and the stability of the  industry. Hong Kong insurers are required by the Insurance Companies Ordinance to maintain minimum capital as well as an  excess of assets over liabilities of not less than a required solvency mar gin, which is determined on the basis of a statutory  formula. Foreign-owned insurers are also required to maintain assets in Hong Kong in an amount suf ficient to ensure that assets  will be available in Hong Kong to meet the claims of Hong Kong policyholders if the insurer should become insolvent.  The  HKIA also reviews the backgrounds and qualifications of insurance companies’  directors and key local management to ensure  that these “controllers” are “fit and proper” to hold their positions and has the authority to approve or disapprove key  appointments. At December 31, 2012, we had 696 employees, with 121 individuals employed by Radian Group, and 535 and 40  individuals employed in our mortgage insurance and financial guaranty businesses, respectively . Management considers  employee relations to be good. VII. Employees D. Foreign Regulation 58