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December 20, 2017

EBA published an assessment report that quantifies the impact of the recently agreed reform package by BCBS on the European banking system; this follows up on the cumulative assessment published on December 07, 2017. The report presents aggregate data on EU banks and assumes full implementation of the final Basel III framework, as endorsed by the Group of Central Bank Governors and Heads of Supervision (GHoS).

The report reflects all the revisions to the credit and operational risk approaches as well as revisions to the process for the estimation of leverage ratio. However, it does not include changes resulting from the revised securitization framework and the revised credit valuation adjustment (CVA) risk framework. Overall, the results, based on data as of December 31, 2015, show that European banks' minimum tier 1 capital requirement would increase by 12.9% at the full implementation date. To comply with the new framework, EU banks would need EUR 17.5 billion of additional CET1 capital, with the total capital shortfall being EUR 39.7  billion. Additionally, 20.5% of the EU banks in the sample would be constrained by the output floor, which has been set by the GHoS at 72.5% of the standardized approach requirements. 

This exercise monitors the impact of fully implementing the Basel reform package on banks' minimum required capital, capital ratios (risk-based and non-risk-based), and capital shortfalls. The results of the report are presented separately for Group 1 and Group 2 banks. Group 1 banks include internationally active banks with tier 1 capital in excess of EUR 3 billion while all other banks are categorized as Group 2 banks. The analysis provides separate figures for the sample of global systemically important institutions. Where applicable, the analysis takes account of capital buffer of the global systemically important institutions, for the risk-based capital requirements and the leverage ratio requirements.

 

Related Link: Press Release

Keywords: Europe, EU, Banking, Basel III, Impact Assessment, Regulatory Reforms, EBA

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