MANILA, Philippines - Most large internationally active banks has met the Basel III risk-based capital minimum requirements, as well as capital shortfalls have been further reduced relative to the target levels, as of end Dec. 2013.
Data released over the weekend by the Basel Committee indicate that a total of 227 banks participated in the current study, comprising 102 large internationally active banks (or Group 1 banks defined as internationally active banks that have Tier 1 capital of more than €3 billion and 125 Group 2 banks representing all other banks.
The study is based on the rigorous reporting process set up by the Committee to periodically review the implications of the Basel III standards for banks at the common equity Tier 1 (CET1) target level of seven percent (plus the surcharges on G-SIBs as applicable).
The aggregate shortfall for Group 1 banks is €15.1 billion, compared to €57.5 billion last June 2013. The common equity Tier 1 (CET1) target level is seven percent (plus the surcharges on G-SIBs as applicable).
As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks was €419 billion.
Under the same assumptions, the capital shortfall for Group 2 banks included in the sample is estimated at €2 billion for the CET1 minimum of 4.5 percent and €9.4 billion for a CET1 target level of seven percent. This represents a decrease compared to the previous period of €10.4 billion and €18.3 billion, respectively.
The average CET1 capital ratios under the Basel III framework across the same sample of banks are 10.2 percent for Group 1 banks and 10.5 percent for Group 2 banks.
Basel III’s liquidity coverage ratio (LCR) will come into effect on January 2015. The minimum requirement will be set initially at 60 percent and then rise in equal annual steps to reach 100 percent in 2019.
The weighted average LCR for the Group 1 bank sample was 119 percent on Dec. 2013, up from 114 percent six months earlier.
For Group 2 banks, the average LCR remained unchanged at 132 percent. For banks in the sample, 76 percent reported an LCR that met or exceeded 100 percent, while 92 percent reported an LCR at or above 60 percent.
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.
The 2013 reporting period is the first data collection exercise for which a comprehensive calculation of the revised NSFR could be conducted. The average NSFR for the Group 1 bank sample was 111 percent while for Group 2 banks the average NSFR was 112 percent.
As of end 2013, 78 percent of the 208 banks in the NSFR sample reported a ratio that met or exceeded 100 percent, while 88 percent of the banks reported an NSFR at or above 90 percent.