Following the finalisation of Basel III in December 2010, its impact has been monitored semi-annually by both the Basel Committee at a global level and the European Banking Authority (EBA) at the European level, using data provided by participating banks on a voluntary and confidential basis.
The EBA has now published its seventh report of the Basel III monitoring exercise on the European banking system.
The set of regulatory requirements that implement Basel III in the EU comprises the Capital Requirements Directive IV (CRD IV) and the Capital Requirements Regulation (CRR) which apply as of 1 January 2014. However, it is noteworthy that the current implementation of the CRD IV / CRR differs from full implementation of those measures due to a number of transitional arrangements.
During the latest EBA monitoring exercise a sample of 146 banks submitted data, comprising 40 Group 1 banks (banks with Tier 1 capital in excess of EUR 3 billion and internationally active) and 108 Group 2 banks (all other banks that are not categorised as Group 1 banks). The monitoring exercise assumed full implementation of the CRD IV / CRR requirements and definitions for the sections referring to capital and risk weighted assets, including the requirements for global systemically important banks. As the rules for the leverage ratio and liquidity ratios have not yet been fully implemented by the CRD IV package in the reporting framework, the relevant sections of the report are still based on the Basel III rules. Therefore, the monitoring exercise assumed full implementation of the Basel III framework requirements and definitions for the sections referring to liquidity and leverage.
Among its findings the EBA report notes that:
- assuming full implementation of the CRD IV / CRR package as of 30 June 2014 (i.e. without taking into account transitional arrangements), the common equity tier 1 (CET1) capital ratios of Group 1 banks would decrease from an average CET1 ratio of 11.7% under the current CRD IV / CRR rules (i.e. considering the transitional arrangements applicable in 2014), to an average CET1 ratio of 10.8%. All Group 1 banks would be at or above the 4.5% minimum while 94% of Group 1 would be above the 7% target level (i.e. including the capital conservation buffer); and
- for Group 2 banks, the average CET1 ratio would decline from 13.4% under the current CRD IV / CRR implementation to 12.3% under the fully phased-in CRD IV / CRR package. The CET1 capital shortfall for Group 2 banks would be none, with respect to the minimum requirement of 4.5%, and approximately EUR 0.7 billion with respect to the target level of 7%. The average Tier 1 and total capital ratios of Group 2 banks would decrease from 13.7% to 12.6% and from 16.3% to 15%, respectively.
View EBA publishes results of the Basel III monitoring exercise as of 30 June 2014, 3 March 2015