BCBS published the results of the latest Basel III monitoring exercise, based on data as of December 31, 2019. 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 and the finalization of the market risk framework that was published in January 2019. The report is accompanied by a Tableau-style dashboard that presents the results for LCR and NSFR in the Basel III monitoring report. The results show that, prior to the COVID-19 crisis, large internationally active banks had made further progress toward meeting the fully phased-in final Basel III capital requirements and their liquidity ratios had improved compared with end-June 2019.
The report includes data for 173 banks, including 105 large internationally active (Group 1) banks and 68 other (Group 2) banks. Group 1 banks are defined as internationally active banks that have tier 1 capital of more than EUR 3 billion and include all 30 global systemically important banks (G-SIBs). Group 2 banks have tier 1 capital of less than EUR 3 billion or are not internationally active. Members’ coverage of their banking sector is very high for Group 1 banks, reaching 100% coverage for some countries, while coverage is lower for Group 2 banks and varies by country. Given the December 2019 reporting date, the results do not reflect the economic impact of the COVID-19 crisis on participating banks. Nevertheless, BCBS believes that the information in the report will provide relevant stakeholders with a useful benchmark for analysis. The report includes a special feature on counterparty credit risk and credit valuation adjustment risk, which provides detailed analysis of the current and revised counterparty credit risk capital requirements. This special feature examines the estimated impact from the introduction of the revised minimum capital requirements for counterparty credit risk and credit valuation adjustment.
The following are the key highlights of the results of the Basel III monitoring exercise on banks:
- The average impact of the fully phased-in final Basel III framework on the Tier 1 minimum required capital of Group 1 banks is lower (+1.8%) when compared with the 2.5% increase at end-June 2019. For this calculation, for three G-SIBs that are outliers due to overly conservative assumptions under the revised market risk framework, zero change from the revised market risk framework has been assumed for the calculation of December 31, 2019 results. If these three banks are reflected with their conservative market risk numbers, there is a 2.1% increase.
- The capital shortfalls at the end-December 2019 reporting date are EUR 10.7 billion for Group 1 banks at the target level, in comparison with EUR 16.6 billion at end-June 2019. The capital shortfalls are not affected by estimation bias.
- Applying the 2022 minimum total loss-absorbing capacity (TLAC) requirements and the initial Basel III framework, none of the 23 G-SIBs reporting TLAC data have reported a shortfall. Considering the fully phased-in final Basel III framework, one bank reports a shortfall of EUR 1.9 billion.
- The weighted average Liquidity Coverage Ratio (LCR) increased to 138% for the Group 1 bank sample and to 186% for Group 2 banks. All but one bank in the sample reported an LCR that met or exceeded 100%.
- The weighted average Net Stable Funding Ratio (NSFR) increased slightly to 117% for the Group 1 bank sample and to 122% for the Group 2 bank sample. As of December 2019, around 96% of the banks in the NSFR sample reported a ratio that met or exceeded 100%, while all Group 1 banks reported an NSFR at or above 90%.
- For the full sample at the end-December 2019 reporting date, the average fully phased-in Basel III Tier 1 leverage ratios are 6.0% for both Group 1 banks and G-SIBs and 5.3% for Group 2 banks. Leverage ratios are lower in Europe (5.3%), compared to the Americas (6.3%) and the rest of the world (6.8%). Compared to the previous reporting date, leverage ratios increased in Europe and the rest of the world while they decreased in the Americas.
Keywords: International, Banking, Basel III Monitoring, Basel, Regulatory Capital, Liquidity Risk, Market Risk, Credit Risk, TLAC, BCBS
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