The Basel Committee on Banking Supervision (BCBS) published the results of its latest Basel III monitoring exercise, based on data as of 30 June 2019 and thus not reflecting the current situation due to COVID-19. The report sets out the impact of the Basel III framework that was initially agreed in 2010 as well as the effects of the December 2017 finalisation of the Basel III reforms and the market-risk framework published in January 2019. Data are provided for 174 banks, including 105 large, internationally active, ‘Group-1’ banks and 69 ‘Group-2’ banks, which have Tier-1 capital of less than €3 billion or are not internationally active.
The European Banking Authority (EBA) report is based on a sample of 105 banks. Overall, the results show that European banks' Tier-1 minimum required capital (MRC) would increase by 16.1% at the full implementation date (2028) not considering EU-specific adjustments. The impact of the risk-based reforms is 20.2%, of which the leading factors are the output floor (6.5%) and operational risk (5%). The leverage-ratio contribution to the total impact leads to an offsetting effect (-4.1%), as the leverage ratio requirements are no longer the constraining effect for some banks under the final Basel III reforms. To comply with the new framework EU banks would need EUR 21.1 billion of additional Tier-1 capital, based on this data before the COVID-19 outbreak.
The report on liquidity measures showed that the liquidity coverage ratio (LCR) stood at around 147% on average in June 2019 and 78% of the banks in the sample had an LCR above 140%. The aggregate gross shortfall amounted to EUR 4.7 billion due to three banks that had monetised their liquidity buffers during the financial crisis.
The Deutsche Bundesbank (BBk) also published the results for 26 German institutions (five Group-1 and 21 Group-2 banks). MRC for German institutions will increase by 26.9% when the final Basel III reform package is implemented. The output floor accounts for 19.7 percentage points of the increase. All institutions had an LCR over 100%; however, to meet the NSFR requirement, there is still a small additional need for stable funding.