Featured Product

    EBA Publishes Report on Impact of Basel Reforms on Capital of EU Banks

    October 04, 2018

    EBA published two reports, one of which measures the impact of implementing Basel III reforms and the other one examines the implementation of liquidity measures in EU. The EBA Basel III capital monitoring report includes a preliminary assessment of the impact of the final Basel reform package on EU banks, assuming its full implementation. The report on liquidity measures monitors and evaluates the liquidity coverage requirements in place in EU. On the same day, BCBS also released the results of its Basel III monitoring exercise, based on data as of December 31, 2017.

    The Basel III monitoring report assesses the impact, on EU banks, of the final revisions of credit risk, operational risk, and leverage ratio frameworks as well as of the introduction of the aggregate output floor. It also quantifies the impact of the new standards for market risk (FRTB), as set out in January 2016, and credit valuation adjustments (CVA). Overall, the results of the Basel III capital monitoring, based on data as of December 31, 2017, show that European banks' minimum tier 1 capital requirement would increase by 16.7% at the full implementation date. The impact of the risk-based reforms is 21.8%, of which the leading factors are the output floor (6.3%) and operational risk (5.7%). The leverage ratio is the constraining (that is, the highest) tier 1 requirement for some banks in the sample, explaining why part of the increase in the risk-based capital metric (-5.1%) is not to be accounted as an actual increase of the overall tier 1 requirement. The liquidity coverage ratio (LCR) of EU banks stood at about 145% in December 2017, materially above the minimum threshold of 100%. To comply with the new framework, EU banks would need EUR 24.5 billion of total capital, of which EUR 6.0 billion is additional common equity tier 1 capital.

    EBA report on liquidity measures under article 509(1) of the Capital Requirements Regulation (CRR) shows that EU banks have continued to improve their LCR. At the reporting date of December 31, 2017, the average LCR of EU banks was 145% and the aggregate gross shortfall amounted to EUR 20.8 billion, corresponding to the four banks that monetized their liquidity buffers during times of stress. A more in-depth analysis of potential currency mismatches in LCR levels suggests that banks tend to hold lower liquidity buffers in some foreign currencies, in particular the US dollar. 

    The results of the Basel III capital monitoring report have been presented separately for Group 1 and Group 2 banks. Group 1 banks are those with tier 1 capital in excess of EUR 3 billion and are internationally active. All other banks have been categorized as Group 2 banks. The analysis of the Basel III capital monitoring report provides separate figures for the sample of global systemically important institutions (G-SIIs). Where applicable, the analysis takes account of the capital buffer of G-SIIs for the risk-based capital requirements and the leverage ratio requirements. Furthermore, the results of the report on liquidity measures are presented separately for G-SIIs and O-SIIs and other banks (non G-SIIs or O-SIIs); some figures are presented by country. 

     

    Related Links

     

    Keywords: Europe, EU, Banking, Basel III Monitoring, CRR, Liquidity Risk, QIS, BCBS, EBA

    Featured Experts
    Related Articles
    News

    FED Adopts Proposal to Implement Reporting Form for SCCL

    FED adopted a proposal to implement the Single-Counterparty Credit Limits (SCCL) reporting form (FR 2590; OMB No. 7100-NEW).

    November 20, 2019 WebPage Regulatory News
    News

    FED Proposes to Extend Initial Compliance Dates Under SCCL Rule

    FED published a proposal to extend, by 18 months, the initial compliance dates for foreign banks subject to the single-counterparty credit limit (SCCL) rule.

    November 20, 2019 WebPage Regulatory News
    News

    CBIRC to Strengthen Supervisory and Policy Support for SME Services

    CBIRC released a notification on strengthening supervision and guidance to enhance the quality and efficiency of financial services for "small and micro-enterprises" (SMEs).

    November 20, 2019 WebPage Regulatory News
    News

    APRA Publishes Approach to Regulating and Supervising GCRA Risks

    APRA published an information paper that sets out a more intensive regulatory approach to transform governance, culture, remuneration, and accountability (GCRA) practices across the prudentially regulated financial sector.

    November 19, 2019 WebPage Regulatory News
    News

    US Agencies Update Rule on Derivative Contracts Exposure Calculation

    US Agencies (FDIC, FED, and OCC) announced a final rule updating the way certain banking organizations are required to measure counterparty credit risk for derivative contracts under their regulatory capital rules.

    November 19, 2019 WebPage Regulatory News
    News

    US Agencies Finalize Rule to Amend Treatment of HVCRE Exposures

    US Agencies (FDIC, FED, and OCC) finalized a rule to modify the treatment of high volatility commercial real estate (HVCRE) exposures, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

    November 19, 2019 WebPage Regulatory News
    News

    US Agencies Finalize Changes to Rule on Supplementary Leverage Ratio

    US Agencies (FDIC, FED, and OCC) finalized changes to the capital requirement for banking organizations predominantly engaged in custodial activities, as required by the Economic Growth, Regulatory Relief, and Consumer Protection (EGRRCP) Act.

    November 19, 2019 WebPage Regulatory News
    News

    IAIS Consults on Guidance on Liquidity Risk Management for Insurers

    IAIS is seeking feedback on the draft application paper on liquidity risk management for insurers.

    November 19, 2019 WebPage Regulatory News
    News

    IAIS Publishes Application Paper on Recovery Planning

    IAIS published the final application paper on recovery planning, along with the resolution of comments on the draft application paper.

    November 18, 2019 WebPage Regulatory News
    News

    FSB Publishes Summary of November Meeting of RCG for MENA Region

    FSB published a summary of the November meeting of the Regional Consultative Group (RCG) for Middle East and North Africa (MENA).

    November 17, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4174