Basel III Monitoring Report

This report presents the results of the Basel Committee's latest 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 September 2014, March 2014, September 2013, March 2013, September 2012 and April 2012.

A total of 224 banks participated in the current study, comprising 98 large internationally active banks ("Group 1 banks", defined as internationally active banks that have Tier 1 capital of more than €3 billion) and 126 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 30 June 2014. 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 30 June 2014 show that all large internationally active banks now meet the Basel III risk-based capital minimum requirements. Moreover, capital shortfalls relative to the higher target levels have been further reduced. For example, at the Common Equity Tier 1 (CET1) target level of 7.0% (plus the surcharges on global systemically important banks - G-SIBs - as applicable), the aggregate shortfall for Group 1 banks is €3.9 billion, compared to €15.1 billion on 31 December 2013 and €485.6 billion on 30 June 2011. 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 2014 was €210.1 billion.

Under the same assumptions, the capital shortfall for Group 2 banks included in the 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%. This represents a narrowing of the shortfall from €2.0 billion and €9.4 billion compared to the previous period, respectively.

The average CET1 capital ratios under the Basel III framework across the same sample of banks are 10.8% for Group 1 banks and 11.8% for Group 2 banks.

Basel III's Liquidity Coverage Ratio (LCR) came into effect on 1 January 2015. The minimum requirement is set initially at 60% and will then rise in equal annual steps to reach 100% in 2019. The weighted average LCR for the Group 1 bank sample was 121% on 30 June 2014, up from 119% six months earlier. For Group 2 banks, the weighted average LCR was 140%, up from 132% six months earlier. For banks in the sample, 80% reported an LCR that met or exceeded 100%, while 96% reported an LCR at or above 60%.

Basel III also includes a longer-term structural liquidity standard - the Net Stable Funding Ratio (NSFR) - which was finalised by the Basel Committee in October 2014. Given data collected as part of the end-June 2014 reporting period was obtained prior to the release of the revised standard, the report provides analysis of results under the consultative document issued in January 2014. The weighted average NSFR for the Group 1 bank sample was 110% while for Group 2 banks the average NSFR was 114%. As of June 2014, 80% of the 212 banks in the NSFR sample reported a ratio that met or exceeded 100%, while 92% of the banks reported an NSFR at or above 90%.