04 April 2012

EBA published a report on the Basel III monitoring exercise

This report summarises the results of the latest monitoring exercise using consolidated data of European banks as of 30 June 2011. A total of 158 banks submitted data for this exercise.

The monitoring exercise provides an impact assessment of the following aspects:

• changes to banks’ capital ratios under Basel III, and estimates of any capital shortfalls. In addition, estimates of capital surcharges for global systemically important banks (G-SIBs) are included, where applicable;
• changes to the definition of capital that result from the new capital standard, referred to as common equity Tier 1 (CET1), including modified rules on capital deductions, and changes to the eligibility criteria for Tier 1 and total capital;
• changes in the calculation of risk-weighted assets (RWA) resulting from changes to the definition of capital, securitisation, trading book and counterparty credit risk requirements;
• the capital conservation buffer;
• the leverage ratio; and
• two liquidity standards – the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR).

Since the new EU Directive and Regulation are not finalised yet, no EU specific rules are analysed in this report. Accordingly, the CRD IV monitoring exercise is carried out assuming full implementation of the Basel III framework. It is important to note that the monitoring exercise is based on static balance sheet assumptions. Planned management actions to increase capital or decrease risk-weighted assets are not taken into account. As a consequence, monitoring results are not comparable to industry estimates, as the latter usually include assumptions on banks’ future profitability, planned capital and/or further management actions that mitigate the impact of Basel III. In addition, monitoring results are not comparable to EU-QIS results, which assessed the impact of policy proposals published in 2009 that differed significantly from the final Basel III framework.

Full report

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