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    BCBS Releases Results of Basel III Monitoring Exercise

    February 21, 2022

    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%).


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    Keywords: International, Banking, Basel III Monitoring, Basel, Regulatory Capital, Liquidity Risk, Market Risk, Credit Risk, TLAC, BCBS, Subheadline

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