EBA publishes results of the Basel III monitoring exercise as of of 31 December 2014

The European Banking Authority (EBA) published today its eighth 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 ratios and leverage ratio (LR), as well as on liquidity ratios - liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) - for banks in the European Union (EU).

The exercise monitors the impact of the transposition of the Basel III requirements on EU banks. In particular, it monitors the impact of fully-implemented Capital Requirements Directive and Regulation (CRD IV / CRR) on capital and risk-weighted assets (RWA), and the impact of fully implementing the Basel III framework on leverage ratio (LR) and liquidity ratios (LCR and NSFR) using data as of December 2014 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 11.4% under full implementation compared to a ratio of 12.2% under the current implementation of the regulation. None of the Group 1 banks would face a CET1 capital shortfall to achieve the minimum requirement of 4.5%, while the same group of banks would be short of EUR 1.5 billion to reach the 7.0% level (minimum CET1 of 4.5% plus capital conservation buffer of 2.5%). The shortfall figure remains the same when the surcharge for global systemically important banks (G-SIBs) is considered. For Group 1 banks, the overall impact of fully-implemented CRD IV / CRR on the CET1 ratio is mostly attributed to changes in the definition of capital, while the changes related to the calculation of RWA have marginally contributed to the change of CET1 ratio.

The fully-implemented leverage ratio (LR) of Group 1 banks would be 4.2%, assuming the joint compliance with the 6% Tier 1 capital requirement. The shortfall for Group 1 banks to meet all risk-sensitive capital and LR ratios would be EUR 19.4 billion.

As for the LCR, results show that as of December 2014, the average LCR of Group 1 banks would have been 123.7%. Approximately 87% 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 38.3 billion for Group 1 banks.

The results for NSFR indicate that, as of June 2014, the average fully-implemented NSFR would have been 102% and 109% for Group 1 and Group 2 banks, respectively. The NSFR figures show that the need for more stable funding would amount to EUR 523 billion, approximately 4.5% of total assets of all non-compliant banks participating in the NSFR part of the monitoring exercise. The increase in the need for more stable funding in December 2014, in relation to June 2014, is attributed to the broader sample of banks included in the December 2014 monitoring exercise.

Note to the editors

1. A total of 364 EU banks submitted data for the exercise on a voluntary and confidential basis, of which 53 banks belong to Group 1 (with a Tier 1 capital exceeding EUR 3 billion and internationally active) and 311 banks belong to Group 2 (all other banks).
2. The results of the current report should be treated cautiously when compared with results from the previous exercises, as the sample of participating banks has significantly increased.
3. Unless otherwise stated, the capital, leverage and liquidity ratios in the monitoring exercise report refer to the full implementation of the CRD IV–CRR/Basel III framework.  
4. When referring to the capital ratios and shortfalls, the current implementation of the CRD IV–CRR differs from the full implementation of the CRD IV–CRR due to transitional arrangements.
5. 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.
6. The results of previous exercises in this series were published in June 2014, September 2014, March 2014, September 2013, March 2013, September 2012 and April 2012.
7. At the end of 2015, the EBA will also publish the NSFR impact assessment report which will present a more detailed analysis on NSFR, in accordance with its mandate under Article 510 of the CRR.