Basel III capital ratios rise for largest global banks, finds BCBS report
26 September 2023 Switzerland
Image: AdobeStock/bakhtiarzein
The most recent Basel III monitoring exercise finds that bank capital ratios for a sample of the largest global banks have grown during H2 2022 to above pre-pandemic levels.
This analysis, conducted by the Basel Committee for Banking Supervision (BCBS), finds that common tier one equity for the largest Tier 1 banks has increased, with the CET1 ratio climbing for this group of banks from 12.7 per cent on 30 June 2022 to 13.1 per cent for 31 December 2022.
“After a downturn in the first half of 2022, initial Basel III capital ratios for a sample of the largest global banks increased above pre-pandemic levels in H2 2022 on the basis of 31 December 2022 data,” says the BCBS report, titled the Basel III Monitoring Report, September 2023.
Leverage ratios for this group of banks also increased over the same timeframe, rising from 5.8 per cent on 30 June 2022 to 6.1 per cent for 31 December 2022. This indicates a reduction in banks’ debt as a percentage of Tier 1 capital.
However, the weighted average liquidity coverage ratio (LCR) for Group 1 banks has contracted, falling from 138.2 per cent on 30 June 2022 to 132.0 per cent on 31 December 2022, resulting in an aggregate shortfall of €15.1 billion (p 10). The LCR reflects the minimum stock of high-quality liquid assets that a bank must hold as liquidity reserves to cover net cash outflows under a 30-day stress scenario.
Three Group 1 banks, which are not named in the BCBS paper, reported that their LCR was below the minimum required level of 100 per cent
Net stable funding ratios (NSFR) improved over the same period for Group 1 banks from 123.5 to 124.4 per cent. All banks indicated that the NSFR was above the required minimum level of 100 per cent.
In contrast to LCR, which measures liquidity coverage according to a 30-day stress scenario, the NSFR indicates a bank’s ability to withstand funding risk over a longer time horizon.
With implementation of the final phase of the Basel III reforms beginning on 1 January 2023, the report finds that the impact of the fully phased-in Basel III framework on the Tier 1 capital of Group 1 banks was a 0.2 per cent rise in CET1 ratio to 12.7 per cent.
For the period, Group 1 banks reported a total regulatory capital shortfall of €3.2 billion on 31 December 2022, down from €7.8 billion at the end of June 2022.
This analysis, conducted by the Basel Committee for Banking Supervision (BCBS), finds that common tier one equity for the largest Tier 1 banks has increased, with the CET1 ratio climbing for this group of banks from 12.7 per cent on 30 June 2022 to 13.1 per cent for 31 December 2022.
“After a downturn in the first half of 2022, initial Basel III capital ratios for a sample of the largest global banks increased above pre-pandemic levels in H2 2022 on the basis of 31 December 2022 data,” says the BCBS report, titled the Basel III Monitoring Report, September 2023.
Leverage ratios for this group of banks also increased over the same timeframe, rising from 5.8 per cent on 30 June 2022 to 6.1 per cent for 31 December 2022. This indicates a reduction in banks’ debt as a percentage of Tier 1 capital.
However, the weighted average liquidity coverage ratio (LCR) for Group 1 banks has contracted, falling from 138.2 per cent on 30 June 2022 to 132.0 per cent on 31 December 2022, resulting in an aggregate shortfall of €15.1 billion (p 10). The LCR reflects the minimum stock of high-quality liquid assets that a bank must hold as liquidity reserves to cover net cash outflows under a 30-day stress scenario.
Three Group 1 banks, which are not named in the BCBS paper, reported that their LCR was below the minimum required level of 100 per cent
Net stable funding ratios (NSFR) improved over the same period for Group 1 banks from 123.5 to 124.4 per cent. All banks indicated that the NSFR was above the required minimum level of 100 per cent.
In contrast to LCR, which measures liquidity coverage according to a 30-day stress scenario, the NSFR indicates a bank’s ability to withstand funding risk over a longer time horizon.
With implementation of the final phase of the Basel III reforms beginning on 1 January 2023, the report finds that the impact of the fully phased-in Basel III framework on the Tier 1 capital of Group 1 banks was a 0.2 per cent rise in CET1 ratio to 12.7 per cent.
For the period, Group 1 banks reported a total regulatory capital shortfall of €3.2 billion on 31 December 2022, down from €7.8 billion at the end of June 2022.
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