Basel III capital ratios for largest global banks rose last year to the highest level since 2012, latest Basel III monitoring exercise shows

• Initial Basel III capital ratios increased to the highest level since the beginning of the exercise in 2012, and banks' profits remained at or near record high levels across all regions in H2 2021.
• The latest monitoring report includes special features on banks' exposures to cryptoassets, and on capital buffers and total CET1 requirements.
• Dashboards now provide an interactive visualisation of the results for market, operational, counterparty credit and credit valuation adjustment risks.

Basel III capital ratios for a sample of the largest global banks increased last year to the highest level since assessment results were first published in 2012, according to the latest Basel III monitoring exercise, based on 31 December 2021 data, published today. After a drop in the previous period, the leverage ratio increased, driven by banks in Europe and the "rest of the world" region.

Profits after tax for the sample of Group 1 banks were €274 billion in the second half of 2021, almost at the record high levels reached in the first half of the year.

The report sets out the impact of the Basel III framework, including the December 2017 finalisation of the Basel III reforms and the January 2019 finalisation of the market risk framework. It covers both Group 1 and Group 2 banks.

The final Basel III minimum requirements will be implemented by 1 January 2023 and fully phased in by 1 January 2028. The average impact of the fully phased-in final Basel III framework on the Tier 1 minimum required capital (MRC) of Group 1 banks is +2.4%, compared with a 3.3% increase at end-December 2020. For this reporting date, Group 1 banks reported total regulatory capital shortfalls amounting to €0.1 billion, compared with a shortfall of €2.3 billion at end-June 2021.

The monitoring exercises also collect bank data on Basel III's liquidity requirements. The weighted average Liquidity Coverage Ratio (LCR) decreased to 141% for the Group 1 bank sample and to 224% for Group 2 banks. In the current reporting period there are six Group 1 banks with an LCR below 100%. This is driven by banks using LCR reserves during the Covid-19 pandemic as intended by the framework. All Group 2 banks report an LCR well above the minimum requirement of 100%.

The weighted average Net Stable Funding Ratio (NSFR) increased to 125% for the Group 1 banks. As of December 2021, all banks in the NSFR sample reported a ratio that met or exceeded 100%.

The report also includes special features on banks' exposures to cryptoassets and on capital buffers and total CET1 requirements.

The special feature on cryptoassets focuses on a small number of banks that reported such exposures at end-2021. Overall exposures, primarily comprising Bitcoin, Ether and related cryptoassets, are small but unevenly distributed across banks. In terms of activities, custodian, clearing and market-making services dominate.

The special feature on capital buffers and total CET1 requirements is the first analysis based on monitoring data that also reflects Pillar 2 requirements. At end-2021, the minimum 4.5% requirement corresponds to around one third of total CET1 capital held by banks. All buffers combined have a share of 36%, leaving CET1 headroom of around 31%. Among the buffers, Pillar 2 contributes around 3%.

The report is also accompanied by interactive Tableau dashboards that allow users to explore the results with greater ease and flexibility. In addition to dashboards published previously, there are now additional dashboards on market risk, operational risk, counterparty credit risk and credit valuation adjustment risk. Similar dashboards related to other sections of the report may be added at a later stage.