Results of the Basel III monitoring exercise as of 31 December 2012

This report presents the results of the Basel Committee's Basel III monitoring exercise. The study is based on the rigorous reporting processes set up by the Committee to periodically review the implications of the Basel III standards for financial markets. The results of previous exercises in this series were published in March 2013, September 2012 and April 2012.

A total of 223 banks participated in the current study, comprising 101 large internationally active banks ("Group 1 banks", defined as internationally active banks that have Tier 1 capital of more than €3 billion) and 122 Group 2 banks (ie representative of all other banks).

The results of the monitoring exercise assume that the final Basel III package has been fully implemented, based on data as of 31 December 2012. That is, they do not take account of the transitional arrangements set out in the Basel III framework, such as the gradual phase-in of deductions from regulatory capital. No assumptions were made about bank profitability or behavioural responses, such as changes in bank capital or balance sheet composition. For that reason, the results of the study are not comparable to industry estimates.

Data as of 31 December 2012 show that shortfalls in the risk-based capital of large internationally active banks continue to shrink. The aggregate shortfall of Common Equity Tier 1 (CET1) capital with respect to the 4.5% minimum has narrowed to €2.2 billion, which is €1.5 billion lower than on 30 June 2012. At the CET1 target level of 7.0% (plus the surcharges on G-SIBs as applicable), the aggregate CET1 shortfall for Group 1 banks is €115.0 billion, which is €82.9 billion lower than previously. As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks during 2012 was €419.4 billion.

Under the same assumptions, the capital shortfall for Group 2 banks included in the sample is estimated at €11.4 billion for the CET1 minimum of 4.5% and €25.6 billion for a CET1 target level of 7.0%. While this represents an increase compared to the previous period, this is mainly due to some Group 2 banks that are included for the first time (ie the sample has been expanded in size) together with a very small part of the sample that has posted an increase in shortfalls. The sum of Group 2 bank after-tax profits prior to distributions in 2012 was €29.5 billion.

The average CET1 capital ratios under the Basel III framework across the same sample of banks are 9.2% for Group 1 banks and 8.6% for Group 2 banks. This compares with the fully phased-in CET1 minimum requirement of 4.5% and a CET1 target level of 7.0%.

Basel III's Liquidity Coverage Ratio (LCR) was revised by the Committee in January 2013 and will come into effect on 1 January 2015. The minimum requirement will be set initially at 60% and then rise in equal annual steps to reach 100% in 2019. The end-December 2012 reporting period was the first data collection exercise for which a comprehensive calculation of the revised LCR standard could be conducted. Given that such data was not collected for the end-June 2012 period, period-over-period comparisons for the LCR are not provided; however, end-December 2012 data are used to provide a comparison of the revised LCR standard issued in January 2013 with the original LCR standard issued in December 2010.

The weighted average LCR for the Group 1 bank sample was 119%. For Group 2 banks, the average LCR was 126%. These figures compare to average LCRs of 95% and 99% for Group 1 banks and Group 2 banks, respectively, based on the December 2010 version of the LCR standards. For banks in the sample, 68% reported an LCR that met or exceeded a 100% minimum requirement, while 90% reported an LCR at or above a 60% minimum requirement.

Basel III's longer-term structural liquidity standard - the Net Stable Funding Ratio (NSFR) - is currently under review by the Basel Committee to address any unintended consequences prior to its implementation by 1 January 2018. Basel III monitoring results for the end-December 2012 reporting period give an indication of the impact of the standard's calibration based on the December 2010 text. The weighted average NSFR for the Group 1 bank sample improved slightly to 100%, compared with 99% at the June 2012 reporting date. For Group 2 banks, the average NSFR declined slightly to 99%, compared with 100% as of June 2012.