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    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    October 18, 2023

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise. The reports are based on the December 31, 2022 data and assesses the impact of full implementation of Basel III banks. The accompanying dashboards (to BCBS report) provide an interactive visualization of the results for credit, market, operational, counterparty credit, and credit valuation adjustment risks. As per the BCBS timeline, the implementation of the final Basel III minimum requirements began on January 01, 2023.

    The BCBS report covers data for 178 banks, including 111 large internationally active (Group 1) banks (including 29 global systemically important banks or G-SIBs) and 67 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 report reveals that initial Basel III capital ratios increased above pre-pandemic levels in the second half of 2022 and liquidity coverage ratios declined but remained above pre-pandemic levels. Below are the additional key highlights of the monitoring exercise:

    • The average impact of the fully phased-in final Basel III framework on the Tier 1 minimum required capital (MRC) of Group 1 banks was +3.0%, compared with +2.8% at end-June 2022.
    • The average Common Equity Tier 1 (CET1) capital ratio under the initial Basel III framework increased from 12.7% to 13.1% for Group 1 banks in the second half of 2022.
    • The capital shortfalls under the final Basel III framework decreased in the second half of 2022 but still remain above the end-2021 level for Group 1 banks and G-SIBs. Group 1 banks reported total regulatory capital shortfalls amounting to EUR 3.2 billion, compared with EUR 7.8 billion at end-June 2022.
    • The weighted average Liquidity Coverage Ratio (LCR) decreased from 138.2% to 132.0% for Group 1 banks but remained close to pre-pandemic levels. Three Group 1 banks reported an LCR below the minimum requirement of 100%.
    • The weighted average Net Stable Funding Ratio (NSFR) increased from 123.5% to124.4% for Group 1 banks. All banks reported an NSFR above the minimum requirement of 100%.
    • The leverage ratio further increased on average, driven by Europe and the Americas, after showing an overall decrease during the pandemic period. The average fully phased-in final Basel III Tier 1 leverage ratios are 6.1% for Group 1 banks, 6.0% for G-SIBs and 6.3% for Group 2 banks.


    The EBA report uses a sample of 157 banks (58 Group 1 banks and 99 Group 2 banks) and assesses the impact that Basel III full implementation will have on EU banks in 2028. The main finding is that to comply with the new Basel framework, EU banks would need a total of EUR 0.6 billion of additional Tier 1 capital at the full implementation date in 2028. The main contributing factors are the output floor and credit risk capital requirements. The overall minimum Tier 1 capital requirement for large and internationally active banks (Group 1) would increase by 10.0%. The requirements for the global systemically important institutions (G-SIIs, subset of Group 1) and for Group 2 banks would increase by 16.0% and 3.6%, respectively. The report also includes an Annex with an assessment of the impact of the Basel III framework taking into account EU-specific adjustments. The considered adjustments are part of either the current CRR 2/CRD 5 framework or the different CRR 3/CRD 6 proposals to that are part of the EU Basel III implementation.


    Visit the Moody’s Analytics microsite for Banking Cloud Solutions to find out how our solutions help banks get up-to-date with the latest capital adequacy requirements and address the regulatory reporting requirements.


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    Keywords: International, Europe, Banking, Basel III Monitoring, Basel, Regulatory Capital, Liquidity Risk, Market Risk, Credit Risk, TLAC, NSFR, LCR, BCBS, EBA

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