European Banking Authority Publishes Basel III Capital Monitoring Report and Update on EU Bank Liquidity Measures
10/02/2019The European Banking Authority has published two reports reviewing the impact of the EU’s implementation of the Basel III capital monitoring reforms and Capital Requirements Regulation liquidity measures. The EBA estimates that once the Basel III reforms are fully implemented, EU banks’ Tier 1 minimum required capital will have increased by an average of 19.3%. Liquidity coverage ratios, meanwhile, averaged roughly 149% in December 2018, significantly above the minimum threshold of 100% set out in the CRR.
The Basel III capital monitoring report is based on data as of December 2018 and reviews the impact of all Basel III reforms on EU banks, including the revised frameworks for credit risk, operational risk and leverage ratios. In particular, the report discusses the impact of: (i) the metrics used to analyze banks’ regulatory capital ratios, capital shortfalls and the impact on Tier 1 minimum required capital; (ii) the revisions to the standardized approach and internal ratings based approach to credit risk; (iii) the revised fundamental review of the trading book framework for market risk; (iv) the standardized measurement approach to operational risk; (v) the elevation of the output floor; (vi) the amended leverage ratio requirements; (vii) the interaction between output floor and leverage ratio requirements; and (viii) the net stable funding ratio.
The CRR liquidity measures report analyzes: (i) the components of the liquidity coverage ratio and the impact of the ratio on different bank business models; (ii) the impact of currency mismatch on liquidity coverage; and (iii) the impact the liquidity coverage ratio has had on banks’ lending behavior.
View the EBA's Report on the Basel III monitoring exercise.
View the EBA's report on CRR liquidity measures.
View details of the EBA's advice on EU implementation of Basel III.
View details of the EU's implementation of the liquidity coverage ratio.
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