07-10-2016, 02:17 PM
1458205680-d312.pdf (Size: 1.1 MB / Downloads: 5)
To assess the impact of the Basel III framework on banks,1 the Basel Committee on Banking Supervision
monitors the effects and dynamics of the reforms. For this purpose, a semiannual monitoring framework
has been set up on the risk-based capital ratio, the leverage ratio, and the liquidity metrics using data
collected by national supervisors on a representative sample of institutions in each country. This report is
the seventh publication of results from the Basel III monitoring exercise2 and summarises the aggregate
results using data as of 30 June 2014. The Committee believes that the information contained in the
report will provide relevant stakeholders with a useful benchmark for analysis.
Information considered for this report was obtained by voluntary and confidential data
submissions from individual banks to their national supervisors. A total of 224 banks participated in the
study, including 98 large internationally active (“Group 1”) banks and 126 other (“Group 2”) banks.3
Members’ coverage of their banking sector is very high for Group 1 banks, reaching 100% coverage for
some countries, while coverage is lower for Group 2 banks and varies by country.
In general, this report does not take into account any transitional arrangements such as phasein
of deductions and grandfathering arrangements. Rather, the estimates presented generally assume
full implementation of the final Basel III requirements based on data as of 30 June 2014. No assumptions
have been made about banks’ profitability or behavioural responses, such as changes in bank capital or
balance sheet composition, either since this date or in the future. For this reason, the results are not
comparable with current industry estimates, which tend to be based on forecasts and consider
management actions to mitigate the impact, and they also incorporate estimates where information is
not publicly available.
Risk-based capital requirements
In the analysis of the risk-based capital requirements, this report focuses on the following items,
assuming that the positions as of 30 June 2014 were subject to the fully phased-in Basel III standards:
• Changes to bank capital ratios under the new requirements, and estimates of any capital
deficiencies relative to fully phased-in minimum and target capital requirements (including
capital surcharges for global systemically important banks – G-SIBs);
• Changes to the definition of capital that result from the new capital standard, referred to as
common equity Tier 1 (CET1), including a reallocation of deductions to CET1, and changes to
the eligibility criteria for Additional Tier 1 and Tier 2 capital; and
• Increases in risk-weighted assets resulting from changes to the definition of capital.
Capital ratios
Compared with the current regulatory framework (which is Basel III with transitional arrangements for
most banks), the average CET1 ratio under the full implementation of the Basel III framework4 would
decline from 11.4% to 10.8% for Group 1 banks. The Tier 1 capital ratios of Group 1 banks would decline,
on average from 12.2% to 11.2% and total capital ratios would decline from 14.9% to 12.6%. For Group 2
banks, the decline in capital ratios is slightly less pronounced than for Group 1. Assuming full
implementation of Basel III, the aggregate CET1 ratio would decline from 12.0% to 11.8% and Tier 1
capital ratios would decline on average from 12.2% to 12.0%. Total capital ratios would decline more
significantly on average from 15.2% to 13.7% due to the phase-out of Tier 2 instruments which will no
longer be eligible in 2022.
Capital shortfalls
Assuming full implementation of the Basel III requirements as of 30 June 2014, including changes to the
definition of capital and risk-weighted assets, and ignoring phase-in arrangements, all Group 1 banks
would meet the CET1 minimum capital requirement of 4.5%. Group 1 banks would have a shortfall of
€3.9 billion for a CET1 target level of 7.0% (ie including the capital conservation buffer); this target also
includes the G-SIB surcharge according to the list of banks published by the Financial Stability Board in
November 2014 where applicable.5 The aggregate CET1 target level shortfall for Group 1 banks has
decreased by €11.2 billion or 74% since the prior period.6 As a point of reference, the sum of profits after
tax prior to distributions across the same sample of Group 1 banks for the six-month period ending
30 June 2014 was €210.1 billion.
Under the same assumptions, the capital shortfall for Group 2 banks included in the Basel III
monitoring sample is estimated at €0.1 billion for the CET1 minimum of 4.5% and €1.8 billion for a CET1
target level of 7.0%. The CET1 shortfall at the 7.0% target level for Group 2 banks is down 81% since
end-December 2013.
Leverage ratio
The average current Tier 1 leverage ratios (ie reflecting all applicable transitional arrangements to the
definition of capital) would be 5.0% for Group 1 banks and for G-SIBs 4.9%, while it would amount to
5.6% for Group 2 banks. The average fully phased-in Basel III Tier 1 leverage ratios are 4.7% for Group 1
banks and 4.5% for G-SIBs, while for Group 2 banks the average is 5.6%.
Seventeen banks, including seven out of 97 Group 1 banks and ten out of 115 Group 2 banks,
do not meet the minimum Basel III leverage ratio of 3%. Moreover, the fraction of banks that do not
meet the Basel III Tier 1 leverage ratio is relatively lower in Group 1 (7.2%) than in Group 2 (8.7%).
Combined shortfall amounts
This Basel III monitoring report also analyses the combined shortfall amounts needed to meet both riskbased
capital and any applicable Tier 1 leverage ratio requirements (see Section 2.7).
For Group 1 banks, the inclusion of the leverage ratio shortfall raises the additional Tier 1
capital shortfall at the minimum level by €7.0 billion. At the target level, the additional Tier 1 capital
shortfall rises by €3.0 billion (from €18.6 billion to €21.7 billion) when the leverage ratio requirement is
included. In turn, this inclusion of applicable Basel III leverage ratio shortfalls increases the total capital
shortfall by €7.0 billion considering all capital ratio minimums and by €2.6 billion (from €101.2 billion to
€103.9 billion) at the target level. Nearly a quarter of this €2.6 billion increase is attributable to G-SIBs
within the Group 1 sample (up €0.7 billion from €82.7 billion to €83.4 billion).
With regard to Group 2 banks, the inclusion of applicable Basel III leverage ratio shortfalls raises
total capital shortfalls at the target level by €2.8 billion (from €12.9 billion to €15.8 billion).
Liquidity standards
Liquidity Coverage Ratio
The Liquidity Coverage Ratio (LCR) was revised by the Committee in January 20137 and came into effect
on 1 January 2015. The minimum requirement is initially set at 60% for 2015 and will then rise in equal
annual steps of 10 percentage points to reach 100% in 2019. The end-June 2014 reporting period was
the fourth data collection exercise for which a comprehensive calculation of the revised LCR standard
could be conducted. Key observations from a comparison of current period to previous period results
include:
• A total of 94 Group 1 and 116 Group 2 banks participated in the LCR monitoring exercise for
the end-June 2014 reference period.
• The average LCR for the Group 1 bank sample was 121%. For Group 2 banks, the average LCR
was 140%. These figures compare to average LCRs of 119% and 132% for Group 1 banks and
Group 2 banks, respectively, as of December 2013.
• 80% of the 210 banks in the LCR sample reported a ratio that met or exceeded a 100%
minimum requirement, compared with 76% as of December 2013, while 96% of the banks