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%.
Keywords: International, Banking, Basel III Monitoring, QIS, Regulatory Capital, Liquidity Risk, LCR, NSFR, Market Risk, BCBS
Previous ArticlePRA Releases New and Updated Versions of PRA 110 LMM Tool
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).