BCBS Publishes Results of Basel III Monitoring for December 2018 Data
BCBS published the results of its latest Basel III monitoring exercise, based on data as of December 31, 2018. 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 finalization of the Basel III reforms. For the first time, the report also reflects the finalization of the market risk framework published in January 2019. The results show that the changes in minimum required capital from fully phased-in final Basel III remain stable for large internationally active banks compared with end-2017, including the recently re-calibrated market risk standards. Liquidity ratios also remain stable compared with the end-June 2018 results.
This exercise covers data from 181 banks. This includes 105 "Group 1" banks that are defined as internationally active banks with have tier 1 capital of more than EUR 3 billion; this group includes all 29 institutions that have been designated as global systemically important banks (G-SIBs). The sample also includes 76 "Group 2" banks, which are banks that have tier 1 capital of less than EUR 3 billion or are not internationally active. The monitoring exercise covered Basel III capital as well as liquidity requirements.
The final Basel III minimum requirements are expected to be implemented by January 01, 2022 and fully phased in by January 01, 2027. On a fully phased-in basis, the capital shortfalls at the end-December 2018 reporting date are EUR 23.5 billion for Group 1 banks at the target level. These shortfalls are almost 75% smaller than in the end-2015 cumulative QIS exercise, thanks mainly to higher levels of eligible capital. For Group 1 banks, the tier 1 minimum required capital would increase by 3.0%, following full phasing-in of the final Basel III standards relative to the initial Basel III standards. This compares with an increase of 3.2% at end-2017. On average, at end-June 2018, the total change in tier 1 minimum required capital at the target level was higher at 5.3% for Group 1 banks. This higher increase was largely driven by the higher market risk impact prior to the application of the re-calibrated 2019 standard.
In terms of Basel III liquidity requirements, the weighted average liquidity coverage ratio (LCR) for the Group 1 bank sample was 136% on December 31, 2018, compared with 135% six months earlier. For Group 2 banks, the weighted average LCR remained declined slightly from 180% to 177%. All but two banks in the sample reported an LCR that met or exceeded the final 100% minimum requirement. The weighted average net stable funding ratio (NSFR) for the Group 1 bank sample remained stable at 116%, while for Group 2 banks the average NSFR increased slightly to 120%. As of December 2018, 94% of the Group 1 banks and 95% of the Group 2 banks in the NSFR sample reported a ratio that met or exceeded 100%, while all banks reported an NSFR at or above 90%.
Related Links
Keywords: International, Banking, Basel III Monitoring, QIS, Regulatory Capital, Liquidity Risk, LCR, NSFR, Market Risk, BCBS
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
NBB Sets Countercyclical Buffer Rate at 0.5% in BelgiumRelated Articles
HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration
The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.
EBA Guide to Monitor Threshold for Intermediate Parent Undertakings
The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).
PRA Finalizes Approach to Supervision of International Banks
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
FCA Issues PS21/9 on Implementation of Investment Firms Regime
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
EBA Proposes Regulatory Standards to Identify Shadow Banking Entities
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
IOSCO Proposes Recommendations on ESG Ratings and Data Providers
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
ESMA Group Issues Recommendations on RFR Switch in Interdealer Market
The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.
ECB Study Assesses Impact of Basel III Finalization Package
The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.
ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading
The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.
PRA Updates Remuneration Policy Statement Templates and Tables
The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.
