BCBS Releases Results of Basel III Monitoring Exercise
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2021 data. The report examines impact of the Basel III framework, including the finalization of Basel III reforms published in December 2017 and the finalization of market risk framework published in January 2019. Historically, the European Banking Authority (EBA) and Deutsche Bundesbank (the central bank of Germany) have separately published the results for their specific jurisdictions too. At a global level, this recent monitoring exercise revealed that risk-based capital ratios remained roughly stable for the Group 1 banks while leverage ratios decreased from the prior period. In Germany, after the leverage ratio came fully into force in June 2021, it stands at 5.0% for the participating banks while these participating banks far exceed the minimum requirements for liquidity coverage. The minimum required capital for domestic banks also increased by 15.9% for this reporting date.
The BCBS report covers data for 172 banks, including 110 large internationally active (Group 1) banks and 62 other (Group 2) banks. Group 1 banks are the banks that have Tier 1 capital of more than EUR 3 billion and are internationally active while the remaining banks are considered Group 2 banks. The analysis assumes full implementation of the Basel III requirements and sets out the following key highlights of the Basel III monitoring exercise on banks:
- The final Basel III minimum requirements will be implemented by January 01, 2023 and fully phased in by January 01, 2028. The average impact of the fully phased-in final Basel III framework on the Tier 1 minimum required capital of Group 1 banks is +3.3%, compared with a 2.9% increase at end-December 2020. Pandemic-related measures in certain jurisdictions reduce current capital requirements in short-term but leave capital requirements under the fully phased-in final Basel III standard unaffected; this could explain some of the observed increase in the impact.
- The total capital shortfalls under the fully phased-in final Basel III framework as of the end-June 2021 reporting date for Group 1 banks further decreased to EUR 2.3 billion in comparison to end-December 2020 at EUR 6.1 billion.
- After applying the 2022 minimum total loss-absorbing capacity, or TLAC, requirements and the initial Basel III framework, only three of the 25 G-SIB reporting entities showed an aggregate incremental shortfall of EUR 24.2 billion.
- The weighted average liquidity coverage ratio (LCR) increased to 144% for the Group 1 bank sample and to 225% for Group 2 banks. In the current reporting period—that is, the first half of 202—seven Group 1 banks had an LCR below 100%, same as observed in the previous reporting period ending on December 31, 2020. All Group 2 banks report an LCR well above the minimum requirement of 100%.
- The weighted average net stable funding ratio, or NSFR, increased to 125% for the Group 1 banks and to 130% for the Group 2 banks. As of June 2021, all but one Group 1 bank and all Group 2 banks in the NSFR sample reported a ratio that met or exceeded 100%.
- For the full sample at the end-December 2020 reporting date, the average fully phased-in final Basel III Tier 1 leverage ratio is 6.2% for Group 1 banks, 6.1% for G-SIBs, and 5.9% for Group 2 banks. Leverage ratios are lower in Europe (5.3%) in comparison with the leverage ratios in the Americas (5.9%) and the rest of the world (7.2%).
Related Links
Keywords: International, Banking, Basel III Monitoring, Basel, Regulatory Capital, Liquidity Risk, Market Risk, Credit Risk, TLAC, BCBS, Subheadline
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
FSB Seeks Views on Debt Overhang Issues of Non-Financial CorporatesRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
