Basel Committee Monitoring Report starts to look at compliance with final Basel III minimum requirements

Basel III monitoring results published by the Basel Committee

  • Fully phased-in final Basel III capital shortfalls more than 70% lower for large internationally active banks compared with end-2015
  • All banks continue to meet initial Basel III minimum and target CET1 capital requirements

The Basel Committee today published the results of its latest Basel III monitoring exercise based on data as of 31 December 2017. The Committee established a rigorous reporting process to regularly review the implications of the Basel III standards for banks, and has been publishing the results of such exercises since 2012. For the first time, 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.

Data have been provided for a total of 206 banks, including 111 large internationally active banks. These “Group 1” banks are defined as internationally active banks that have Tier 1 capital of more than €3 billion, and include all 30 banks that have been designated as global systemically important banks (G-SIBs). The Basel Committee’s sample also includes 95 “Group 2” banks (ie banks that have Tier 1 capital of less than €3 billion or are not internationally active).

The final Basel III minimum requirements are expected to be implemented by 1 January 2022 and fully phased in by 1 January 2027. On a fully phased-in basis, the capital shortfalls at the end-2017 reporting date are €25.8 billion for Group 1 banks at the target level. This is more than 70% lower than in the end-2015 cumulative QIS exercise and driven mainly by higher levels of eligible capital.

For Group 1 banks, the Tier 1 minimum required capital (MRC) would increase by 3.6% following full phasing-in of the final Basel III standards relative to the initial Basel III standards. Compared with the previous cumulative QIS (based on end-2015 data), the impact on MRC has increased from -0.5% to 1.7%, excluding the effect of market risk to make the two studies comparable. The differences are partially driven by more conservative assumptions for the implementation of the revised operational risk standards in some countries.

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