Highlights of the Basel III monitoring exercise as of 30 June 2024

To assess the impact of the Basel III framework on banks, the Basel Committee on Banking Supervision monitors the effects and dynamics of the reforms. For this purpose, a semiannual monitoring framework has been set up for the risk-based capital ratio, the leverage ratio and liquidity metrics, using data collected by national supervisors on a representative sample of institutions in each country. Since the end-2017 reporting date, this report has also captured the effects of the Committee's finalisation of the Basel III reforms. ¹ This report summarises the aggregate results using data as of 30 June 2024. ² The Committee believes that the information contained in the report will provide relevant stakeholders with a useful benchmark for analysis.

Information considered for this report was obtained from voluntary and confidential submissions of data from individual banks and their national supervisors. At the jurisdictional level, there may be ongoing mandatory data collection, which also feeds into this report. Data were included for 176 banks, including 115 large internationally active ("Group 1") banks, among them 29 global systemically important banks (G-SIBs) and 61 other ("Group 2") banks. ³ Members' coverage of their banking sector is very high for Group 1 banks, reaching 100% coverage for some countries, while coverage is lower for Group 2 banks and varies by country.

In general, this report does not consider any transitional arrangements such as grandfathering arrangements. Rather, the estimates presented assume full implementation of the Basel III requirements based on data as of 30 June 2024. No assumptions have been made about banks' profitability or behavioural responses, such as changes in bank capital or balance sheet composition, since this date or in the future. Furthermore, the report does not reflect any additional capital requirements under Pillar 2 of the Basel III framework.

• Compared with the end-December 2023 reporting period, the average Common Equity Tier 1 (CET1) capital ratio under the current Basel III framework increased from 13.1% to 13.4% for Group 1 banks in H1 2024.
• The average impact of the Basel III framework on the Tier 1 minimum required capital (MRC) of Group 1 banks increased (+1.9%) when compared with end-December 2023. The average increase for G-SIBs is 1.5%.
• There is a minor capital shortfall under the final Basel III framework in H1 2024 while there was no shortfall in the previous period.
• Applying the 2022 minimum total loss-absorbing capacity (TLAC) requirements and the current Basel III framework, two of the 18 G-SIBs reporting TLAC data reported an aggregate incremental shortfall of €19.6 billion.
• The average Liquidity Coverage Ratio (LCR) of Group 1 banks is slightly lower at 136.0% compared with the last reporting date, while the average Net Stable Funding Ratio (NSFR) increased from 122.6% to 123.6%.

• The balanced data set for Group 1 banks showed a sizeable increase in current Basel III capital ratios in H1 2024, driven by an increase in Tier 1 capital of a larger magnitude than the increase in risk-weighted assets (RWA). The overall CET1 capital ratios for Group 1 banks in the balanced data set were 13.4% in June 2024.
• Currently, the Tier 1 capital ratios are higher in Europe than in the Americas and the rest of the world region. However, this relationship was the reverse from 2011 to 2014. The rest of the world region is also the main driver for the increase in H1 2024.

• For Group 1 banks, the Tier 1 MRC would increase by 1.9%, following the full phase-in of the final Basel III standards. The increase in the MRC is underpinned by the incremental impact of the risk-based requirements by 3.1%, offset by the reduction in leverage ratio requirements by 1.2 percentage points. The increase in risk-based components is mainly driven by the output floor (+1.5%), market risk (+0.9%) and credit risk (+0.7%).
• The average impact of the final Basel III framework on Group 1 banks, at +1.9%, is higher than the end-December 2023 value of +1.3%.
• The impact on MRC across regions varies considerably for Group 1 banks, with a very moderate increase in the Americas (+0.2%), an increase in the rest of the world region (+1.7%) and, in contrast, a strong increase in MRC for European banks (+4.0%).
• For Group 2 banks, the overall 5.2% increase in Tier 1 MRC is driven by an increase in the risk-based measure of 9.5%, stemming mainly from credit risk (+4.9%) and the output floor (+4.3%), which is partially offset by a reduction in leverage ratio MRC (–4.3%).

• For the balanced data set of Group 1 banks, the leverage ratio was relatively stable in the current reporting period. This contrasts with the sharp decrease that started at end-2021, particularly for the Americas.
• Leverage ratios for Group 1 banks are still lower in Europe (5.0%) than in the Americas (5.8%) and the rest of the world (6.9%).
• For the unbalanced data set at the end-June 2024 reporting date, the average fully phased-in final Basel III Tier 1 leverage ratios are 6.1% for Group 1 banks, 6.0% for G-SIBs and 6.8% for Group 2 banks.

• For this reporting date, one G-SIB reported a regulatory capital shortfall for of €0.9 billion.

• From end-June 2011 to end-June 2024, the level of Group 1 banks' CET1 capital increased by 143% from €1,626 billion to €3,957 billion. Since end-December 2023, Group 1 CET1 capital has increased by €99 billion (or 3.0%).
• Over H1 2024, CET1 capital increased across all regions, with the most notable increment in the rest of the world.
• Overall, profits after tax increased for the Group 1 banks in the sample and stood at €245.4 billion in H1 2024, but still below their peak as observed in end-June 2023. The dividend payout ratio stood at 35.4%, which is about 187 basis points above the one reported in the preceeding period.

• Annual after-tax profits for the Group 1 banks (ie summed up over two consecutive reporting dates) increased moderately in Europe (+2.4%), while they remained largely flat in the Americas and declined by 12.3% in the rest of the world, compared with the 12-month period ending June 2023. The significant spike in Europe in H1 2023 is driven by non-recurring profits due to a merger between two banks.
• Compared with the previous reporting date, the annual dividend payout ratio has increased in Europe and the Americas, while it decreased in the rest of the world. It is significantly below the record high ratios observed in 2019 and 2020 in the Americas, while it is at pre-pandemic levels in Europe and the rest of the world.

• As of June 2024 and for a balanced data set of Group 1 banks, non-securitisation credit risk ⁴ continues to be the dominant portion of overall MRC, on average covering 73.2% of total MRC. Among the non-securitisation credit risk asset classes, the share of MRC for corporate exposures increased from 31.0% at end-June 2011 to 34.0% at the current reporting date.
• The share of operational risk in MRC increased sharply from 8.5% at the end of June 2011 to 17.3% at end-2018 and then decreased to reach 15.0% at the current reporting date. The increase in the early 2010s was attributed in large part to the surge in the number and severity of operational risk events during and after the financial crises, which are factored into the calculation of MRC for operational risk under the advanced measurement approach. More recently, there has been some "fading out" of the financial crisis losses so that in 2022, the lowest loss level of the previous 10 years is observed. This explains the latest decrease in capital requirements, especially for the banks heavily affected in the Great Financial Crisis. In contrast, losses triggered by the Covid-19 pandemic are not yet having a significant impact on the loss severity level, but this may realise in the near future.
• The share of MRC for securitisation exposures declined from 7.4% to 2.7% between June 2011 and June 2024.

• The weighted average LCR at end-June 2023 is 136.0% for Group 1 banks and 194.0% for Group 2 banks.
• In the current reporting period, three Group 1 banks had an LCR below 100% and hence a shortfall (ie the difference between high-quality liquid assets and net cash outflows), which amounts to €18.0 billion.
• The weighted average NSFR was 123.6% for Group 1 banks and 138.1% for Group 2 banks at end-June 2024.
• All banks reported an NSFR that exceeded 100%.

• For a balanced data set of Group 1 banks, all but two banks meet a 100% LCR at end-June 2024, resulting in an aggregate shortfall of €16.0 billion. The shortfall increased by €4.4 billion since December 2023. The average LCR for this sample decreased to 135.1% at end-June 2024 compared with 136.5% in the previous reporting period. Banks in the sample did not experience drops in the LCR during the turmoil that some banks outside the monitoring sample experienced.
• There was again no agreggate NSFR shortfall for the balanced data set of Group 1 banks. The average NSFR for the same sample of banks decreased very slightly from 123.2% to 123.0% in June 2024.
• Both LCR and NSFR were above pre-pandemic levels at the reporting date.

• For a balanced data set of Group 2 banks, the LCR shortfall has remained at zero since June 2017. The average LCR for the same sample of banks increased by 2.1 percentage points to 194.0% in June 2024, caused by a decrease in net outflows compared with the last reporting date.
• The aggregate NSFR shortfall remained at zero for the balanced data set of Group 2 banks. The average NSFR for the same sample of banks increased slightly by 1.6 percentage points to reach 133.3% in June 2024.

• Since 2020, the weighted average LCR for both Europe and the rest of the world has largely been above 140%, while the average LCR for the Americas has been around 120%. While Europe and the Americas initially had lower average LCRs compared with the rest of the world, the average LCRs of Europe and the rest of the world tended to gradually converge before the onset of the pandemic. The regions with lower end-2012 average ratios saw significant increases, in particular between end-2012 and June 2014, and Europe saw such increases again at the start of the pandemic. The increase in Europe was reversing between June 2021 and June 2022, although since then the LCR of European banks is still above end-2019 levels.
• The weighted average NSFR at end-June 2024 for Group 1 banks in each of the three regions was well in excess of 100%. The average NSFR in Europe increased slightly from 122.0% at end-December 2023 to 122.7% at end-June 2024. After a significant drop during H1 2022, the NSFR of banks in the Americas reverts, landing at 120.7% at end-June 2024.

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¹    See Basel Committee on Banking Supervision,       High-level summary of Basel III reforms, December 2017; Basel Committee on Banking Supervision, Basel III: finalising post-crisis reforms, December 2017.

²    A list of previous publications is included in Annex C.

³    Group 1 banks are those that have Tier 1 capital of more than €3 billion and are internationally active. All other banks are considered Group 2 banks. Not all banks provided data relating to all parts of the Basel III framework.

⁴    Here, non-securitisation credit risk is defined as the sum of corporate, bank, sovereign, retail, equity and other credit, as illustrated in the graph.