Global banks are getting closer to meeting the minimum capital requirements imposed under the new Basel III capital adequacy regime, with the shortfall now down to about $230 billion (US dollars).
The Basel Committee on Banking Supervision published the latest results of its Basel III monitoring exercise, which finds that banks have narrowed the shortfall they face in meeting the new Basel III capital rules. A total of 210 banks participated in the current study, comprised of 101 so-called Group 1 banks (which are banks that have Tier 1 capital in excess of €3 billion and are internationally active), and 109 Group 2 banks (which is everyone else).
The survey found, based on data as of June 30, 2012, that the average common equity Tier 1 capital ratio (CET1) of Group 1 banks was 8.5%, compared with the Basel III minimum requirement of 4.5%. In order for all of these banks to reach the 4.5% minimum, an increase of €3.7 billion in CET1 would be required. Achieving a target ratio of 7.0% (which would include the capital conservation buffer) would require €208.2 billion; this includes the surcharge for global systemically important banks too.
The Basel Committee notes that, compared to the December 2011 exercise, the aggregate shortfall from the 4.5% minimum level has fallen by €8.2 billion. And, the shortfall from the target level of 7.0% is down by €175.9 billion.
For Group 2 banks, the survey found that the average CET1 ratio stood at 9.0%. And, it said that, for all Group 2 banks in the sample to meet the new 4.5% ratio, the additional capital needed is estimated to be €4.8 billion. Additionally, they’d need another €16.0 billion to reach the 7.0% target, it noted.