Basel 3 monitoring exercises

Basel 3 monitoring exercises

Latest monitoring of how banks are performing against Basel 3.


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The Basel Committee and the EBA have published their latest monitoring of how banks are performing against the fully phased-in Basel 3 (or CRR/CRD4 in Europe) capital, leverage and liquidity standards, using data at end-June 2016:

All major banks now meet the minimum CET1 capital and leverage ratios, and the current minimum LCR. Disclosures by the main Irish banks confirm this trend. However, some banks still need to make further progress if they are to meet the forthcoming 100% minimum LCR (by 2019 under the Basel standard and by 2018 under EU rules) and NSFR requirements (by 2018). See table below. 

The Basel Committee samples show very little change overall in the aggregate capital, leverage and liquidity ratios since end-December 2015. The EBA sample shows some further improvement since end-2015, but major European banks remain well behind major banks elsewhere in the world on the leverage ratio and the NSFR.

Major European banks have improved their capital and leverage ratios by both increasing their capital resources and reducing their RWAs, whereas major banks elsewhere have maintained or even increased their RWAs. Balance sheet shrinkage has been a feature for Irish banks for several years now.

Basel 4 may in due course reveal significant shortfalls that are not covered in the Basel and EBA exercises. Although, the impact on Irish banks is less as trading books do not feature as prominently as elsewhere. The monitoring exercises relate only to Basel 3. The minimum CET1 capital ratio covers only the 4.5% absolute minimum, the capital conservation buffer of 2.5%, and any G-SIB capital surcharge. It does not cover any D-SIB capital surcharge, other systemic risk buffer, macro-prudential buffer, or Pillar 2 or stress-testing add-ons. Nor does it cover the impact of RWA inflation (from the revised market risk framework and from the Basel Committee proposals on credit and operational risk and any “capital floor”). Similarly, the minimum leverage ratio is set at 3% (against tier 1 capital) and does not reflect any national super-equivalence (as in the US, UK, Netherlands and Switzerland).

The Basel Committee also reports on the progress made by G-SIBs in meeting the requirements for total loss absorbing capacity (TLAC). This shows that nine of the 25 G-SIBs would fail to meet the minimum requirements that will apply in 2019, with a combined shortfall of €131 billion. The largest individual shortfall is equivalent to 7.2% of the bank’s RWAs. 18 G-SIBs would not meet the higher requirements that will apply from 2022, with a combined shortfall of €318 billion (and a largest individual shortfall of 9.9% of RWAs).  

Table: Main results of the Basel 3 monitoring exercises

  Basel Group 1 Of which Basel G-SIBs Shortfalls EBA Group 1 Shortfalls
Sample 100 large internationally active banks     44 internationally active banks with tier 1 capital in excess of EUR 3 billion  
CET1 capital ratio (%) 11.9 11.8 None. Lowest Group 1 bank at 8.1%; lowest G-SIB at 9.4%. 12.7 None
Leverage ratio (%) 5.6 5.6 None 4.6 None
LCR (%) 126 125

All banks in the sample meet the current minimum LCR requirement of 70% in 2016 (increasing to 100% in 2019).

Most (88%) banks already above 100% LCR.

Lowest Group 1 bank at 74%; lowest G-SIB at 107%


All banks meet LCR minimum of 70% in 2016 (increasing to 100% in 2018).

Two do not meet 100%.

Lowest at 94%

NSFR (%) 114 116

Most (84%) banks at or above the minimum NSFR of 100% (applicable from January 2018).

Lowest Group 1 bank at 84%; lowest G-SIB at 98%.


67% of banks at or above the minimum NSFR of 100% (applicable from January 2018).

Lowest at 79%.

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