Featured Product

    Bundesbank on Basel III Monitoring Exercise Results for German Banks

    October 02, 2019

    Bundesbank published results of the Basel III monitoring exercise for German banks as at December 31, 2018. The statistical annex, covering the December 2018 data collection, includes the effects of the finalized Basel III reform package, which the BCBS adopted in December 2017. The results show that when the finalized Basel III reform package has been fully implemented, the common equity tier 1 (CET1) capital ratio will fall from its current level of 14.5% to 10.7%. Additionally, the leverage ratio, on implementation of the finalized framework, will drop by 0.2 percentage points to 4.4%.

    The key results of the Basel III monitoring exercise for German banks include the following:

    • The total capital requirement on full implementation of the finalized Basel III reform package decreased from EUR 15.5 billion to EUR 14.0 billion compared with the previous survey as at June 30, 2018. Based on a consistent sample, this corresponds to around one-quarter of the original total capital requirement from the first survey on the reporting date of June 30, 2011.
    • The aggregate minimum capital requirements show an increase of 22.2%, thus down by 1.4 percentage points from the previous period. This decline can largely be attributed to the Fundamental Review of the Trading Book (FRTB), which BCBS published in January 2019 and which has now been included in the impact studies for the first time. On the other hand, the output floor of 72.5% remains the leading factor behind the overall increase of 22.2%. Throughout its phase-in period, the output floor effect will increase from 0.2% in 2022 to 17.6% in 2027. Once fully implemented, the output floor will represent the binding capital requirement for around one-quarter of banks.
    • The impact of the revisions to the credit risk framework (3.6%) is spread across the standardized approach (1.7%), the internal ratings-based approach (0.5%) and securitization (1.5%). While Group 1 banks will be affected most by the revised rules for securitization, banks in Group 2 will experience the greatest impact from the revision of the standardized approach for credit risk.
    • The impact of the introduction of the FRTB will mainly affect larger trading book banks. For the first time, the impact study takes into account the re-calibrated market risk framework published in January 2019. A period-on-period comparison is made difficult by the large changes in trading book holdings, but the minimum capital requirements are set to decline from 4.6% to 3.3%. Within this sample, both Group 1 and Group 2 banks calculate over 50% of their minimum capital requirements for market risk using internal models.
    • The new standards for banks’ liquidity coverage are met almost entirely across the board. On aggregate, the liquidity coverage ratio (LCR) is 148% and the net stable funding ratio (NSFR) is 112%. None of the participating banks would need additional liquidity to meet the minimum requirement for the LCR. To meet the NSFR, there is a residual need for stable funding of about EUR 7.9 billion.

    In monitoring the implementation of Basel III, BCBS has been studying the impact of the capital requirements and the new liquidity standards on selected banks since 2011. Monitoring is conducted semi-annually at the end of December and the end of June. The objectives of the exercise are to monitor adaptive behaviors of banks to prepare for upcoming regulatory reforms and to assess the incidental capital shortfall of fully phased-in frameworks. 

     

    Related Links

    Keywords: Europe, Germany, Banking, Basel III, Basel III Monitoring, Capital Requirements, Liquidity Risk, LCR, NSFR, FRTB, Output Floor, Market Risk, Bundesbank

    Featured Experts
    Related Articles
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    News

    ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020

    ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.

    January 19, 2021 WebPage Regulatory News
    News

    ESAs Publish Reporting Templates for Financial Conglomerates

    ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.

    January 18, 2021 WebPage Regulatory News
    News

    EBA Publishes Report on Asset Encumbrance of Banks in EU

    EBA published the annual report on asset encumbrance of banks in EU.

    January 18, 2021 WebPage Regulatory News
    News

    MAS Revises Guidelines on Technology Risk Management

    MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.

    January 18, 2021 WebPage Regulatory News
    News

    US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C

    FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.

    January 15, 2021 WebPage Regulatory News
    News

    EBA Proposes Guidelines for Establishing Intermediate Parent Entities

    EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.

    January 15, 2021 WebPage Regulatory News
    News

    EC Adopts Financial Reporting Changes Arising from Benchmark Reforms

    EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.

    January 14, 2021 WebPage Regulatory News
    News

    BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk

    BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.

    January 14, 2021 WebPage Regulatory News
    News

    HMT Updates List of Post-Brexit Equivalence Decisions in UK

    HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.

    January 14, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6462