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A total of 210 banks participated in the current study, comprising 101 Group 1 banks (ie those that have Tier 1 capital in excess of €3 billion and are internationally active) and 109 Group 2 banks (i.e. all other banks).
While the Basel III framework sets out transitional arrangements to implement the new standards, the monitoring exercise results assume full implementation of the final Basel III package based on data as of 30 June 2012 (i.e. they do not take account of the transitional arrangements such as the phase-in of deductions from regulatory capital). No assumptions were made about bank profitability or behavioural responses, such as changes in bank capital or balance sheet composition. For that reason, the results of the study are not comparable to industry estimates.
Based on data as of 30 June 2012 and applying the changes to the definition of capital and risk-weighted assets, the average Common Equity Tier 1 capital ratio (CET1) of Group 1 banks was 8.5 per cent, as compared with the Basel III minimum requirement of 4.5 per cent. In order for all Group 1 banks to reach the 4.5 per cent minimum, an increase of €3.7 billion in CET1 would be required.
The overall shortfall increases to €208.2 billion to achieve a CET1 target level of 7.0 per cent (i.e. including the capital conservation buffer); this amount includes the surcharge for global systemically important banks where applicable. As a point of reference, the sum of profits after tax and prior to distributions across the same sample of Group 1 banks between 1 July 2011 and 30 June 2012 was €379.6 billion.
Compared to the December 2011 exercise, the aggregate CET1 shortfall with respect to the 4.5 per cent minimum for Group 1 banks has fallen by €8.2 billion. At the CET1 target level of 7.0 per cent, the aggregate CET1 shortfall for Group 1 banks has fallen by €175.9 billion.
For Group 2 banks, the average CET1 ratio stood at 9.0 per cent. In order for all Group 2 banks in the sample to meet the new 4.5 per cent CET1 ratio, the additional capital needed is estimated to be €4.8 billion. Banks in this group would have required an additional €16.0 billion to reach a CET1 target of 7.0 per cent; the sum of these banks' profits after tax and prior to distributions between 1 July 2011 and 30 June 2012 was €22.9 billion.