Prior to COVID-19, large internationally active banks made further progress towards meeting fully phased-in final Basel III capital requirements and their liquidity ratios improved compared with end-June 2019, according to the Basel Committee Basel II Monitoring Report.
The report sets out the impact of the Basel III framework that was initially agreed in 2010 as well as the effects of the Committee's December 2017 finalisation of the Basel III reforms and the finalisation of the market risk framework published in January 2019.
Given the December 2019 reporting date, the results do not reflect the economic impact of COVID-19 on participating banks.
The report showed that compared with the previous reporting period (end-June 2019) the average Common Equity Tier 1 (CET1) capital ratio under the initial Basel III framework has increased from 12.8 percent to 13 percent for group 1 banks and from 14.8 percent to 15.2 percent for group 2 banks.
The average impact of the final Basel III framework on the tier 1 minimum required capital (MRC) of group 1 banks is lower (+1.8 percent) when compared to the 2.5 percent increase at end-June 2019.
Elsewhere, the report found that total capital shortfalls under the fully phased-in final Basel III framework as of the end December 2019 reporting date for group 1 banks decreased to €10.7 billion in comparison to the end-June 2019 at €16.6 billion.
The Basell Committee said the decrease was not influenced by the smaller size of the group 1 sample in the current period.
Applying the 2022 minimum TLAC requirements and the initial Basel III framework, the committee explained that none of the 23 G-SIBs reporting total loss-absorbing capacity (TLAC) data have reported a shortfall.
Considering the fully phased-in final Basel III framework, one bank reports a shortfall of €1.9
billion, it was revealed.
The report also showed that group 1 banks’ average liquidity coverage ratio (LCR) increased from 136.2 percent to 138.2 percent, while the average net stable funding ratio (NSFR) increased only slightly from 116.4 percent to 117.2 percent.
For group 2 banks, there was also an increase for both the LCR and the NSFR.
The data is provided for 173 banks, including 105 large internationally active banks.
The group 1 banks are defined as internationally active banks that have tier 1 capital of more than €3 billion and include all 30 institutions that have been designated as global systemically important banks (G-SIBs).
The Basel Committee's sample also includes 68 group 2 banks which include banks that have tier 1 capital of less than €3 billion or are not internationally active.
The final Basel III minimum requirements will be implemented by 1 January 2023 and fully phased in by 1 January 2028.
In July, the Basel Committee on Banking Supervision published a new progress report on adoption of the Basel regulatory framework.
