EBA publishes results of the Basel III monitoring exercise as of 31 December 2013

11 September 2014

The European Banking Authority (EBA) published today its sixth report of the Basel III monitoring exercise on the European banking system. This exercise, run in parallel with the one conducted by the Basel Committee on Banking Supervision (BCBS) at a global level, allows the gathering of aggregate results on capital, liquidity (liquidity coverage ratio (LCR) and net stable funding ratio (NSFR)) and leverage ratios for banks in the European Union (EU).

The exercise monitors the impact of the transposition of the Basel III requirements in the EU. In particular, it monitors the impact of fully-implemented CRDIV/CRR on capital and RWAs, and the impact of full implementation of the Basel III framework on liquidity (LCR and NSFR) and leverage ratios using data as of December 2013 under a static balance sheet assumption. Results show that the Common Equity Tier 1 capital ratio (CET1) of the largest internationally-active European banks (Group 1 banks) would be on average 10.1% compared to a ratio of 12.4% under the current regulation. Therefore, Group 1 banks would face a CET1 capital shortfall of EUR 0.1 billion to achieve the minimum requirement of 4.5%, and of EUR 11.6 billion to reach the target level of 7.0% or the higher threshold set for global systemically important banks (G-SIBs). The latter capital shortfall would, therefore, be decreased by 68% (from EUR 36.3 billion to EUR 11.6 billion).

For Group 1 banks, the overall impact of fully-implemented CRDIV/CRR on the CET1 ratio is attributed to changes both in the definition of capital as well as in the calculation of RWAs.

As for the Liquidity Coverage Ratio (LCR), results show that as of December 2013, the average LCR of Group 1 banks would have been 107.3%. More than 70% of the total sample of banks would have already met the final 100% Basel III requirement to be reached by 2019. In addition, the exercise reveals a shortfall of liquid assets of EUR 124.5 billion for Group 1 banks.

The results for Net Stable Funding Ratio (NSFR) indicate that, as of December 2013, the average fully-implemented Basel III NSFR for Group 1 banks would have been 102% and 109% for Group 2 banks. The NSFR figures show that the need for more stable funding would amount to €473bn, approximately 2% of banks' total assets. 

Finally, the average fully-implemented Leverage Ratio (LR) would be 3.7% for Group 1 banks, assuming the joint compliance with the 6% Tier I capital requirement. The shortfall for Group 1 banks due to the implementation of the provisions relating to LR would be €22.1bn.

Note to the editors

  • A total of 151 EU banks participated in the exercise on a voluntary and confidential basis, of which 42 banks (with a Tier 1 capital exceeding €3bn and internationally active) form Group 1 banks and 109 banks are within Group 2 banks (all other banks).
  • The results of this study are not comparable to industry estimates, as they do not include assumptions regarding banks' future profitability, changes in capital or balance sheet composition, nor further management actions that could be taken in response to the new Basel framework.
  • The results of previous exercises in this series were published in March 2014, September 2013, March 2013, September 2012 and April 2012.

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Franca Rosa Congiu

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