Basel III Monitoring Report as of 31 December 2013

This report presents the results of the Basel Committee's Basel III monitoring exercise. The study is based on the rigorous reporting process set up by the Committee to periodically review the implications of the Basel III standards for banks. The results of previous exercises in this series were published in March 2014, September 2013, March 2013, September 2012 and April 2012.

A total of 227 banks participated in the current study, comprising 102 large internationally active banks ("Group 1 banks", defined as internationally active banks that have Tier 1 capital of more than €3 billion) and 125 Group 2 banks (ie representative of all other banks).

The results of the monitoring exercise assume that the final Basel III package is fully in force, based on data as of 31 December 2013. 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. 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 are not comparable to industry estimates.

Data as of 31 December 2013 show that most large internationally active banks now meet the Basel III risk-based capital minimum requirements, and capital shortfalls have been further reduced relative to the target levels. For example, at the Common Equity Tier 1 (CET1) target level of 7.0% (plus the surcharges on G-SIBs as applicable), the aggregate shortfall for Group 1 banks is €15.1 billion, compared to €57.5 billion on 30 June 2013. As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks for the year ending 31 December 2013 was €419 billion.

Under the same assumptions, the capital shortfall for Group 2 banks included in the sample is estimated at €2.0 billion for the CET1 minimum of 4.5% and €9.4 billion for a CET1 target level of 7.0%. This represents a decrease compared to the previous period of €10.4 billion and €18.3 billion, respectively.

The average CET1 capital ratios under the Basel III framework across the same sample of banks are 10.2% for Group 1 banks and 10.5% for Group 2 banks.

Basel III's Liquidity Coverage Ratio (LCR) will come into effect on 1 January 2015. The minimum requirement will be set initially at 60% and then rise in equal annual steps to reach 100% in 2019. The weighted average LCR for the Group 1 bank sample was 119% on 31 December 2013, up from 114% six months earlier. For Group 2 banks, the average LCR remained unchanged at 132%. For banks in the sample, 76% reported an LCR that met or exceeded 100%, while 92% reported an LCR at or above 60%.

Basel III also includes a longer-term structural liquidity standard - the Net Stable Funding Ratio (NSFR). In January 2014, the Basel Committee published a consultative document on proposed revisions to the NSFR. The end-December 2013 reporting period is the first data collection exercise for which a comprehensive calculation of the revised NSFR could be conducted. The average NSFR for the Group 1 bank sample was 111% while for Group 2 banks the average NSFR was 112%. As of December 2013, 78% of the 208 banks in the NSFR sample reported a ratio that met or exceeded 100%, while 88% of the banks reported an NSFR at or above 90%.