Results of the Basel III monitoring exercise as of 30 June 2013

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 September 2013, March 2013, September 2012 and April 2012.

A total of 227 banks participated in the current study, comprising 102 large internationally active banks ("Group 1 banks", defined as internationally active banks that have Tier 1 capital of more than €3 billion) and 125 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 30 June 2013. 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 30 June 2013 show that shortfalls in the risk-based capital of large internationally active banks generally continue to shrink. At the Common Equity Tier 1 (CET1) target level of 7.0% (plus the surcharges on G-SIBs as applicable), the aggregate shortfall for Group 1 banks is €57.5 billion, compared to €115.0 billion on 31 December 2012. However, the aggregate shortfall of CET1 capital with respect to the 4.5% minimum has increased to €3.3 billion, which is €1.1 billion higher than previously. As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks for the year ending 30 June 2013 was €456 billion.

Under the same assumptions, the capital shortfall for Group 2 banks included in the sample is estimated at €12.4 billion for the CET1 minimum of 4.5% and €27.7 billion for a CET1 target level of 7.0%. This represents an increase compared to the previous period of €1.0 billion and €2.1 billion, respectively, which is caused by a small number of Group 2 banks within the sample. The sum of Group 2 bank after-tax profits prior to distributions in the year ending 30 June 2013 was €26 billion.

The average CET1 capital ratios under the Basel III framework across the same sample of banks are 9.5% for Group 1 banks and 9.1% 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) 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 weighted average LCR for the Group 1 bank sample was 114% on 30 June 2013, down from 119% six months earlier. For Group 2 banks, the average LCR has increased from 126% to 132%. For banks in the sample, 72% reported an LCR that met or exceeded a 100% minimum requirement, while 91% reported an LCR at or above a 60% minimum requirement.

Basel III also includes a longer-term structural liquidity standard - the Net Stable Funding Ratio (NSFR). In January 2014, the Basel Committee published a consultative document on proposed revisions to the NSFR. While the most recent Basel III monitoring exercise collected NSFR data, the results were based on the original version of Basel III's NSFR as published in December 2010. Results of the NSFR calculation are therefore not presented in today's monitoring report to avoid confusion with the revised NSFR issued by the Committee in January. The Committee's next Basel III monitoring exercise, which will be based on financial data as of December 2013, will include data related to the proposed revisions to the NSFR. The Committee expects to publish the results of that exercise later this year.