The world’s big banks are still about €374.1 billion ($476.5 billion) short of new capital requirements that will be imposed under the revised capital adequacy regime known as Basel III.
The Basel Committee published the results of its latest Basel III monitoring exercise Thursday. The study found that, based on data as of December 31, 2011, the average common equity Tier 1 capital ratio of large, internationally active banks was 7.7%, which is above the Basel III minimum requirement of 4.5%. However, for all of these banks to reach the 4.5% minimum, an increase of €11.9 billion in capital would be required.
Moreover, the overall shortfall increases to €374.1 billion for those banks to achieve a target level of 7.0% — including the planned capital conservation buffer, and the surcharge for global systemically important banks.
This represents progress from the June 2011 study, with the aggregate shortfall from the 4.5% minimum now having been reduced by €26.9 billion, and the shortfall from the 7.0% target reduced by €111.5 billion.
For smaller banks, the study found the average Tier 1 ratio at 8.8%. However, it said that they also need estimated additional capital of €7.6 billion to reach the 4.5% level, and €21.7 billion to reach the 7.0% target.
The exercise results assume full implementation of the final Basel III requirements and does not take into account transitional arrangements, such as the phase in of deductions. No assumptions were made about bank profitability or behavioural responses, such as changes in bank capital or balance sheet composition.