Basel III Monitoring Report

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Basel III Monitoring Report

March 2018

 

This report presents the results of the Basel Committee's latest Basel III monitoring exercise based on data as of 30 June 2017. The Committee established a rigorous reporting process to regularly review the implications of the Basel III standards for banks, and it has published the results of previous exercises since 2012. The Committee's finalisation of the Basel III reforms is not yet reflected in the results; the collection of relevant data for those reforms started for the end-2017 reporting date.

Data have been provided for a total of 193 banks, comprising 106 large internationally active banks. These "Group 1 banks" are defined as internationally active banks that have Tier 1 capital of more than €3 billion, and include all 30 banks that have been designated as global systemically important banks (G-SIBs). The Basel Committee's sample also includes 87 "Group 2 banks" (ie banks that have Tier 1 capital of less than €3 billion or are not internationally active).

The Basel III minimum capital requirements are expected to be fully phased-in by 1 January 2019 (while certain capital instruments could still be recognised for regulatory capital purposes until end-2021). On a fully phased-in basis, data as of 30 June 2017 show that all banks in the sample meet both the Basel III risk-based capital minimum Common Equity Tier 1 (CET1) requirement of 4.5% and the target level CET1 requirement of 7.0% (plus any surcharges for G-SIBs, as applicable). Between 31 December 2016 and 30 June 2017, Group 1 banks continued to reduce their capital shortfalls relative to the higher total capital target levels; in particular, the Tier 2 capital shortfall has decreased from €0.3 billion to €24 million. As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks for the six-month period ending 30 June 2017 was €212.8 billion. In addition, applying the 2022 minimum requirements for Total Loss-Absorbing Capacity (TLAC), 10 of the G-SIBs in the sample have a combined incremental TLAC shortfall of €109 billion as at the end of June 2017, compared with €116 billion at the end of December 2016.

The monitoring reports also collect bank data on Basel III's liquidity requirements. Basel III's Liquidity Coverage Ratio (LCR) was set at 60% in 2015, increased to 80% in 2017 and will continue to rise in equal annual steps to reach 100% in 2019. The weighted average LCR for the Group 1 bank sample was 134% on 30 June 2017, up from 131% six months earlier. For Group 2 banks, the weighted average LCR was 175%, up from 159% six months earlier. Of the banks in the LCR sample, 99% of the Group 1 banks (including all G-SIBs) and all Group 2 banks in the sample reported an LCR that met or exceeded 100%. All banks reported an LCR at or above the 90% minimum requirement that will be in place for 2018.

Basel III also includes a longer-term structural liquidity standard - the Net Stable Funding Ratio (NSFR). The weighted average NSFR for the Group 1 bank sample was 117%, while for Group 2 banks the average NSFR was 118%. As of June 2017, 93% of the Group 1 banks (including all G-SIBs) and 94% of the Group 2 banks in the NSFR sample reported a ratio that met or exceeded 100%, while all Group 1 banks and 99% of the Group 2 banks reported an NSFR at or above 90%.

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Basel III monitoring results published by the Basel Committee

6 March 2018

 

Press release

• All banks meet Basel III minimum and target CET1 capital requirements as agreed up to end-2015
• All G-SIBs meet both fully phased-in liquidity requirements

The Basel Committee today published the results of its latest Basel III monitoring exercise based on data as of 30 June 2017. The Committee established a rigorous reporting process to regularly review the implications of the Basel III standards for banks, and it has published the results of previous exercises since 2012. The Committee's finalisation of the Basel III reformsis not yet reflected in the results; the collection of relevant data for those reforms started for the end-2017 reporting date.

Data have been provided for a total of 193 banks, comprising 106 large internationally active banks. These "Group 1 banks" are defined as internationally active banks that have Tier 1 capital of more than €3 billion, and include all 30 banks that have been designated as global systemically important banks (G-SIBs). The Basel Committee's sample also includes 87 "Group 2 banks" (ie banks that have Tier 1 capital of less than €3 billion or are not internationally active).

The Basel III minimum capital requirements are expected to be fully phased-in by 1 January 2019 (while certain capital instruments could still be recognised for regulatory capital purposes until end-2021). On a fully phased-in basis, data as of 30 June 2017 show that all banks in the sample meet both the Basel III risk-based capital minimum Common Equity Tier 1 (CET1) requirement of 4.5% and the target level CET1 requirement of 7.0% (plus any surcharges for G-SIBs, as applicable). Between 31 December 2016 and 30 June 2017, Group 1 banks continued to reduce their capital shortfalls relative to the higher total capital target levels; in particular, the Tier 2 capital shortfall has decreased from €0.3 billion to €24 million. As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks for the six-month period ending 30 June 2017 was €212.8 billion. In addition, applying the 2022 minimum requirements for Total Loss-Absorbing Capacity (TLAC), 10 of the G-SIBs in the sample have a combined incremental TLAC shortfall of €109 billion as at the end of June 2017, compared with €116 billion at the end of December 2016.

The monitoring reports also collect bank data on Basel III's liquidity requirements. Basel III's Liquidity Coverage Ratio (LCR) was set at 60% in 2015, increased to 80% in 2017 and will continue to rise in equal annual steps to reach 100% in 2019. The weighted average LCR for the Group 1 bank sample was 134% on 30 June 2017, up from 131% six months earlier. For Group 2 banks, the weighted average LCR was 175%, up from 159% six months earlier. Of the banks in the LCR sample, 99% of the Group 1 banks (including all G-SIBs) and all Group 2 banks in the sample reported an LCR that met or exceeded 100%. All banks reported an LCR at or above the 90% minimum requirement that will be in place for 2018.

Basel III also includes a longer-term structural liquidity standard - the Net Stable Funding Ratio (NSFR). The weighted average NSFR for the Group 1 bank sample was 117%, while for Group 2 banks the average NSFR was 118%. As of June 2017, 93% of the Group 1 banks (including all G-SIBs) and 94% of the Group 2 banks in the NSFR sample reported a ratio that met or exceeded 100%, while all Group 1 banks and 99% of the Group 2 banks reported an NSFR at or above 90%.

Note to editors

The results of the monitoring exercise assume that the positions as of 30 June 2017 were subject to the fully phased-in Basel III standards as agreed up to end-2015. That is, they do not take account of the transitional arrangements set out in the Basel III framework, such as the gradual phase-in of deductions from regulatory capital. Furthermore, the report does not reflect any standards agreed since the beginning of 2016, such as the revisions to the market risk framework and the Committee's finalisation of the Basel III reforms in December 2017. No assumptions were made about bank profitability or behavioural responses, such as changes in bank capital or balance sheet composition. For that reason, the results of the study may not be comparable with industry estimates.