The capital shortfalls forecast by global banking regulators were further reduced over the last six months of 2013, according to a new report.
The Basel Committee on Banking Supervision published the latest results of its efforts to monitor the implementation of new Basel III capital rules, which were adopted in response to the financial crisis. A total of 227 banks participated in the study, comprised of 102 so-called “Group 1” large internationally active banks (that have Tier 1 capital of more than €3 billion) and 125 “Group 2” banks, which are smaller operations.
The survey found that, as of December 31, most large internationally active banks now meet the Basel III minimum requirements for risk-based capital. The aggregate shortfall from the common equity Tier 1 target level of 7.0% (plus the surcharges imposed on banks that are considered systemically important to the global financial system) is now down to just €15.1 billion, compared to €57.5 billion on June 30, 2013.
Similarly, the capital shortfall for Group 2 banks is now estimated at just €2.0 billion for the common equity Tier 1 minimum of 4.5%, down from €10.4 billion; and, the shortfall, assuming a target level of 7.0%, has been reduced to €9.4 billion, down from €18.3 billion. The average Tier 1 capital ratios under the Basel III framework are now 10.2% for Group 1 banks and 10.5% for Group 2 banks.
The majority of banks now also already meet new liquidity requirements, which will start to be phased in next year. The minimum liquidity requirement will initially be set at 60%, which will rise to 100% in 2019. Currently, 92% of banks are at or above the 60% threshold, and 76% are already at the 100% level, the report says. The weighted average for Group 1 banks was 119% at the end of 2013, up from 114% six months earlier. For Group 2 banks, the average remained unchanged at 132%.
Finally, the Basel Committee reports that the average “net stable funding ratio” (NSFR) for Group 1 banks was 111%, and 112% for Group 2 banks. As of December 2013, 78% reported a ratio of at least 100%, and 88% of banks reported an NSFR at or above 90%.