The Basel Committee has published the results of its latest Basel III monitoring exercise based on data as of 30 June 2017.
Basel III is an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09. The measures aim to strengthen the regulation, supervision and risk management of banks. Like all Basel Committee standards, Basel III standards are minimum requirements which apply to internationally active banks. Members are committed to implementing and applying standards in their jurisdictions within the time frame established by the Committee.
The committee stated that the 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 for the report has 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 €3bn, 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”, which have Tier 1 capital of less than €3bn or are not internationally active.
The Committee has established a reporting process to regularly review the implications of the Basel III standards for banks, having published the results of previous exercises since 2012.
Its latest report found that the Basel III minimum capital requirements are expected to be fully phased-in by 1 January 2019. On a fully phased-in basis, data as of 30 June 2017 show 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 €0.3bn to €24. 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 €212.8bn .
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%.
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
