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Basel 3 monitoring exercises

Basel 3 monitoring exercises

The Basel Committee and the EBA have published their latest monitoring of how banks are performing against the fully phased-in Basel 3 (CRR in Europe) capital, leverage and liquidity standards, using data at end-December 2016.


Banking prudential, EMA FS Regulatory Insight Centre

KPMG in the UK


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Both the Basel Committee (PDF 2.85 MB) and the EBA (PDF 1.35 MB) samples show further improvements in aggregate capital, leverage and liquidity ratios since end-June 2016, with major European banks no longer lagging behind major banks elsewhere in the world on the two liquidity ratios.

Almost all major banks meet the minimum CET1 capital and leverage ratios, and the current minimum LCR, although an unspecified number of major European banks have a shortfall against the minimum CET1 ratio (compared with no shortfalls at end-June 2016). A few banks still need to make further progress if they are to meet the forthcoming 100% minimum LCR and NSFR requirements.

Major European banks have improved their capital and leverage ratios by both increasing their capital resources and reducing their RWAs, whereas major banks elsewhere have maintained or even increased their RWAs.

Basel 4 may in due course reveal significant shortfalls that are not covered in these monitoring exercises, which relate only to Basel 3. The minimum CET1 capital ratio covers only the 4.5% absolute minimum, the capital conservation buffer of 2.5%, and any G-SIB capital surcharge. It does not cover any D-SIB capital surcharge, other systemic risk buffer, macro-prudential buffer, or Pillar 2 or stress-testing add-ons. Nor does it cover the impact of RWA inflation (from the revised market risk framework and from the Basel Committee proposals on credit and operational risk and any “capital floor”). Similarly, the minimum leverage ratio of 3% does not reflect any national super-equivalence (as in the US, UK, Netherlands and Switzerland).

The Basel Committee also reports on the progress made by G-SIBs in meeting the requirements for total loss absorbing capacity (TLAC). Five of the 25 G-SIBs would fail to meet the minimum requirements that will apply in 2019, with a combined shortfall of €20 billion (and a largest individual shortfall equivalent to 2% of the bank’s RWAs) – sharply down from end-June 2016, when nine G-SIBs had a combined shortfall of €131 billion. 12 G-SIBs would not meet the higher requirements that will apply from 2022, with a combined shortfall of €116 billion (and a largest individual shortfall of 4.5% of RWAs) – again sharply down from end-June 2016, when 18 G-SIBs had a combined shortfall of €318 billion.

Main results

  Basel Group 1 Of which Basel G-SIBs Shortfalls EBA Group 1  Shortfalls
Sample 105 large internationally active banks     45 large internationally active banks  
CET1 capital ratio (%) 12.3 12.3 None. Lowest Group 1 bank 8.2%; lowest G-SIB 9.7%. 13.2 Shortfall of €1.4 billion
Leverage ratio (%) 5.6 5.8 None.Lowest Group 1 bank 3.1%; lowest G-SIB 3.4%. 4.9 None
LCR (%) 131 129 All banks in the sample meet the current minimum LCR requirement of 70% in 2016 (increasing to 100% in 2019).Most (91%) banks already above 100% LCR.Lowest Group 1 bank 84%; lowest G-SIB 112% 134 All banks meet LCR minimum of 70% in 2016 (increasing to 100% in 2018).Indeed, all these banks are already above 100%.
NSFR (%) 116 117 Most (94%) banks at or above the minimum NSFR of 100% (applicable from January 2018).All banks above 90%. 108 80% of banks at or above the minimum NSFR of 100% (applicable from January 2018).5% of banks below 85%.


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