04 October 2024

Further Tier 1 capital needs for the full implementation of the EU specific Basel III reform are minimal, the EBA Report finds

In terms of minimum required capital, the impact has further decreased in relation to the previous reference date of December 2022. The impact is minimal in terms of estimated Tier 1 capital shortfall, while the total capital shortfall is estimated at EUR 5.1 billion.

The European Banking Authority (EBA) today published its third mandatory Basel III monitoring Report which assesses the impact that the EU implementation of the Basel III framework will have on EU banks at the full implementation date, i.e. 2033. The additional impact considers the application of all EU requirements, as reflected in the Capital Requirements Regulation (CRR3), i.e. Pillar 2 requirements, and all EU specific capital buffers. 

For the EU banking sector as a whole, the capital that needs to comply with the Basel III reform amounts to EUR 0.9 billion of Tier 1 capital. This means that the additional capital needed can easily be raised over the remaining period until full implementation.  For the purpose of comparison, the Annex to the Report shows the impact of the baseline Basel III proposals, i.e. prior to the implementation of the EU adjustments, or the adaptation of specific discretions, that are part of the revised CRR3.

Overview of the results

Overall, the results of the mandatory Basel III monitoring exercise show that European banks' minimum Tier 1 capital requirement would increase by 7.8% at the full implementation date in 2033.  The main contributing factors are the output floor and operational risk.  The overall minimum Tier 1 capital requirement for large and internationally active banks (Group 1) would increase by 8.6%. The requirements for the global systemically important institutions (G-SIIs, subset of Group 1) and for Group 2 banks would increase by 12.2% and 3.6%, respectively.

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