All large internationally active banks meet the Basel III risk-based capital minimum Common Equity Tier 1 (CET1) requirements as well as the target level of 7.0 percent (plus the surcharges on global systemically important banks – G-SIBs – as applicable). This is one of the highlights to emerge from the Basel Committee’s publication of the results of its latest Basel III monitoring exercise.
Data have been provided for a total of 230 banks, comprising 101 large internationally active banks (Group 1 banks, defined as internationally active banks that have Tier 1 capital of more than EUR 3 billion) and 129 Group 2 banks.
Between December 31 2014 and June 30 2015, Group 1 banks continued to reduce their capital shortfalls relative to the higher Tier 1 and Total capital target levels; the additional Tier 1 (AT1) capital shortfall has decreased from EUR 6.5 billion to EUR 3.4 billion and the Tier 2 capital shortfall from EUR 40.6 billion to EUR 12.8 billion. Most of this Tier 2 capital shortfall is attributable to the G-SIBs in the sample, while the AT1 capital shortfall is fully attributable to the non-G-SIB Group 1 banks. As a point of reference, the sum of after-tax profits prior to distributions across the same sample of Group 1 banks for the six-month period ending June 30 2015 was EUR 307.2 billion.
Under the same assumptions, there is no capital shortfall for Group 2 banks included in the sample for the CET1 minimum of 4.5 percent. For a CET1 target level of 7.0 percent, the shortfall has narrowed from EUR 1.5 billion to EUR 0.2 billion since the previous period.