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EBA publishes the regular Basel III capital monitoring report and an update on the compliance of EU banks with liquidity measures

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02 October 2019

The European Banking Authority (EBA) published today two reports, which monitor the impact of implementing the final Basel III reforms and the current implementation of liquidity measures in the EU. The EBA Basel III capital monitoring report is the latest in a regular exercise using the methodology of the Basel Committee of Banking Supervision and is not comparable to the broader Call for Advice report published in July 2019. The present report includes an assessment of the impact of the full implementation (to 2027) of the Basel III package on EU banks based on data as of 30 June 2018. The report on liquidity measures evaluates the liquidity coverage requirements currently in place in the EU. Overall, the EBA estimates that the Basel III reforms, once fully implemented, would determine an average increase by 19.3% of EU banks' Tier 1 minimum required capital.  The liquidity coverage ratio (LCR), which was fully implemented in January 2018, stood at around 149% on average in June 2018, well above the minimum threshold of 100%.

Basel III capital monitoring results

The results of the Basel III capital monitoring exercise, based on data as of 30 June 2018, show that European banks' minimum Tier 1 capital requirement would increase by 19.3% at the full implementation date (2027). The impact of the risk-based reforms is 20.4%, of which the leading factors are the output floor (5.4%) and operational risk (4.7%). 

To comply with the Pillar 1 requirements in the new framework, EU banks would need EUR 26 billion of additional total capital, of which EUR 24.9 billion of Tier 1 capital.

Change in total T1 MRC, as percentage of the overall current Tier 1 MRC, due to the full implementation of Basel III (2027) (weighted averages, in %)

Bank group

Credit risk

Market risk

CVA

Op

Risk

Output floor

Total risk-based

Revised LR

Total

 

SA

IRB

Securitisation

CCPs

 

 

 

 

 

 

 

All banks

1.9

1.9

0.7

0.0

1.9

4.0

4.7

5.4

20.4

–1.1

19.3

Group 1

1.7

1.5

0.8

0.0

2.1

4.3

5.2

5.5

21.1

–0.3

20.7

Of which: G-SIIs

2.1

2.1

0.9

0.0

3.1

4.6

5.7

6.0

24.3

2.7

27.1

Group 2

3.6

4.0

0.0

0.0

0.3

2.1

1.6

4.8

16.0

–5.6

10.5

Source: EBA quantitative impact study (QIS) data (December 2018); sample: 113 banks.

EBA report on liquidity measures

The EBA report on liquidity measures shows that EU banks have continued to improve their compliance with the liquidity coverage ratio (LCR). In December 2018, the average LCR was 149%. The aggregate gross shortfall amounted to EUR 15.7 billion and it is entirely attributed  to four banks that monetised their liquidity buffers during times of stress. An in-depth analysis of potential currency mismatches in LCR levels suggests that banks tend to hold significantly lower liquidity buffers in some foreign currencies, in particular US dollar and GBP. Insome cases LCR ratios in USD or GBP are well below 100%. The analysis of the impact of the LCR on lending does not provide clear empirical evidence of this relationship.

Related documents:

EBA Report on Liquidity Measures under Article 509(1) of the CRR.pdf

Basel III monitoring exercise.pdf

Related links:

Quantitative impact study / Basel III monitoring

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