EBA Reports Examine Implementation of Basel III and Liquidity Measures
EBA published two reports that monitor the impact of the implementation of the final Basel III reforms and of the liquidity measures in EU. The EBA Basel III capital monitoring report is the latest in a regular exercise using the BCBS methodology and is not comparable to the broader Call for Advice report published in July 2019. The report includes an assessment of the impact of the full implementation (to 2027) of the Basel III package on EU banks based on data as of June 30 2018. The report on liquidity measures evaluates the implementation of liquidity coverage requirements in place in EU.
Report on Basel III monitoring. The baseline impact assessment methodology quantifies the differences in the Pillar 1 minimum required capital between the current EU implementation of the Basel standards (Capital Requirements Regulation or CRR/Capital Requirements Directive (CRD) IV) and the full Basel III implementation. Overall, EBA estimates that the Basel III reforms, once fully implemented, would determine an average increase of 19.3% in tier 1 minimum required capital of banks in EU. The impact of the risk-based reforms is 20.4%, of which the leading factors are the output floor (5.4%) and operational risk (4.7%). Compared with the current fully phased-in CRR/CRD IV rules, under Basel III full implementation the tier 1 capital shortfall increases for all banks, but particularly for global systemically important institutions. To comply with the Pillar 1 requirements in the new framework, EU banks would need EUR 26 billion of additional total capital, of which EUR 24.9 billion of tier 1 capital. The results of this exercise are based on data as of December 31, 2018.
Report on monitoring of liquidity measures. The report shows that EU banks have continued to improve their compliance with the liquidity coverage ratio (LCR). The LCR, which was fully implemented in January 2018, stood at nearly 149% on average in June 2018, well above the minimum threshold of 100%. The LCR level of global systemically important institutions stood at 145% and that of other systemically important institutions at 144%. The weighted average LCR of the remaining banks was higher at 183%. The aggregate gross shortfall amounted to EUR 15.7 billion and it is entirely attributed to four banks that monetized their liquidity buffers during times of stress. An in-depth analysis of the potential currency mismatches in LCR levels suggests that banks tend to hold significantly lower liquidity buffers in some foreign currencies, in particular USD and GBP. In some cases, LCR ratios in USD or GBP are well below 100%. The analysis of the impact of the LCR on lending does not provide clear empirical evidence of this relationship. The analysis is based on Common Reporting or COREP.
Related Links
Keywords: Europe, EU, Banking, Basel III, Basel III Monitoring, Liquidity Monitoring, Regulatory Capital, Liquidity Risk, CRR/CRD, LCR, EBA
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
FINMA Revises Practices in Relation to Supervision of Fintech FirmsRelated Articles
EC Consults on PSD2 and Open Finance; EU Reaches Agreement on DORA
The European Commission (EC) published a public consultation on the review of revised payment services directive (PSD2) and open finance.
EC Mandates ESAs to Propose Amendments to SFDR Technical Standards
The European Commission (EC) has issued two letters mandating the European Supervisory Authorities (ESAs) to jointly propose amendments to the regulatory technical standards under Sustainable Finance Disclosure Regulation or SFDR.
EBA Examines Supervisory Practices, Issues Deposits Reporting Template
The European Banking Authority (EBA) published its annual report on convergence of supervisory practices for 2021. Additionally, following a request from the European Commission (EC),
US Agency Publications Address Basel, Reporting, and CECL Developments
The Farm Credit Administration published, in the Federal Register, the final rule on implementation of the Current Expected Credit Losses (CECL) methodology for allowances
SEC Extends Comment Period on Climate Risk Disclosures
The U.S. Securities and Exchange Commission (SEC) looks set to intensify focus on crypto-assets and cyber risk and extended the comment period on the proposed rules to enhance and standardize climate-related disclosures for investors.
APRA Reduces Committed Liquidity Facility, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility and issued an update on the operational preparedness for zero and negative market interest rates.
CMF Consults on Basel Rules, Presents Roadmap to Address Climate Risks
The Commission for the Financial Market (CMF) in Chile published capital adequacy ratios (as of February 2022, January 2022, and December 2021) for 17 banks and for the banking system.
PRA Issues Statement on NPEs and Policy on Trading Activity Wind-Down
The Prudential Regulation Authority (PRA) issued a statement on the European Banking Authority (EBA) guidelines on management of non-performing exposures (NPEs) and forborne exposures.
EBA Updates Standards for 2023 Benchmarking of Internal Approaches
The European Banking Authority (EBA) updated the implementing technical standards that specify the data collection for the 2023 supervisory benchmarking exercise in relation to the internal approaches used in market risk, credit risk, and IFRS 9 accounting.
EIOPA Responds to Stakeholder Views on Blockchain in Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published a feedback statement on the responses received to the consultation on blockchain and smart contracts in insurance.