EBA Reports Examine Implementation of Basel III and Liquidity Measures
EBA published two reports that monitor the impact of the implementation of the final Basel III reforms and of the liquidity measures in EU. The EBA Basel III capital monitoring report is the latest in a regular exercise using the BCBS methodology and is not comparable to the broader Call for Advice report published in July 2019. The report includes an assessment of the impact of the full implementation (to 2027) of the Basel III package on EU banks based on data as of June 30 2018. The report on liquidity measures evaluates the implementation of liquidity coverage requirements in place in EU.
Report on Basel III monitoring. The baseline impact assessment methodology quantifies the differences in the Pillar 1 minimum required capital between the current EU implementation of the Basel standards (Capital Requirements Regulation or CRR/Capital Requirements Directive (CRD) IV) and the full Basel III implementation. Overall, EBA estimates that the Basel III reforms, once fully implemented, would determine an average increase of 19.3% in tier 1 minimum required capital of banks in EU. The impact of the risk-based reforms is 20.4%, of which the leading factors are the output floor (5.4%) and operational risk (4.7%). Compared with the current fully phased-in CRR/CRD IV rules, under Basel III full implementation the tier 1 capital shortfall increases for all banks, but particularly for global systemically important institutions. To comply with the Pillar 1 requirements in the new framework, EU banks would need EUR 26 billion of additional total capital, of which EUR 24.9 billion of tier 1 capital. The results of this exercise are based on data as of December 31, 2018.
Report on monitoring of liquidity measures. The report shows that EU banks have continued to improve their compliance with the liquidity coverage ratio (LCR). The LCR, which was fully implemented in January 2018, stood at nearly 149% on average in June 2018, well above the minimum threshold of 100%. The LCR level of global systemically important institutions stood at 145% and that of other systemically important institutions at 144%. The weighted average LCR of the remaining banks was higher at 183%. The aggregate gross shortfall amounted to EUR 15.7 billion and it is entirely attributed to four banks that monetized their liquidity buffers during times of stress. An in-depth analysis of the potential currency mismatches in LCR levels suggests that banks tend to hold significantly lower liquidity buffers in some foreign currencies, in particular USD and GBP. In some cases, LCR ratios in USD or GBP are well below 100%. The analysis of the impact of the LCR on lending does not provide clear empirical evidence of this relationship. The analysis is based on Common Reporting or COREP.
Related Links
Keywords: Europe, EU, Banking, Basel III, Basel III Monitoring, Liquidity Monitoring, Regulatory Capital, Liquidity Risk, CRR/CRD, LCR, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
ACPR Issues the COREP Taxonomy Version 2.7.0.1 Under CRRRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
