Global banks continue to narrow the capital shortfall they face under the new capital adequacy regime known as Basel III.
The Basel Committee on Banking Supervision released its latest report Wednesday, detailing the results of its monitoring of the implementation of the new capital rules. A total of 223 banks participated in the latest study, comprising 101 large internationally active banks (so-called “Group 1 banks”) and 122 other banks (Group 2 banks).
It found that the aggregate shortfall for Group 1 banks is now €115.0 billion, which is down by €82.9 billion from the previous monitoring report. This assumes that the final Basel III package has been fully implemented, based on data as of Dec. 31, 2012.
Under the same assumptions, the capital shortfall for Group 2 banks included in the sample is estimated at €25.6 billion. This represents an increase compared to the previous period, but the Basel Committee says this is mainly due to an expanded sample.
The average tier 1 capital ratios under the Basel III framework came in at 9.2% for Group 1 banks and 8.6% for Group 2 banks. This compares with the fully phased-in minimum requirement of 4.5% and a target level of 7.0%.
The report also examined implementation on Basel III’s Liquidity Coverage Ratio (LCR), which will come into effect on January 1, 2015, for the first time. The minimum requirement will be set initially at 60% and then rise in equal annual steps to reach 100% in 2019. Today, the Basel Committee reports that the weighted average LCR for the Group 1 bank sample was 119%. For Group 2 banks, the average LCR was 126%.