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01 July 2003

Commission published QIS 3 results





The Commission published the third Quantative Impact Study in order to make available additional analysis for the impact on Europe of the new capital adequacy framework. The document presents results in terms of changes to minimum capital requirements relative to the current Basel Accord.

The following key conclusions illustrating the expected impacts on European banks can be drawn:

  • The new rules will in general reduce capital requirements for EU banks by around 5% compared to present levels.
  • The outcomes for the different approaches are in line with objectives of combining capital neutrality with appropriate incentives for institutions to move towards more sophisticated approaches.
  • Smaller domestic group 2 banks adopting the SA approach will face slightly reduced capital charges.
  • Larger internationally active group 1 banks adopting the FIRB approach will face substantially unchanged capital charges.
  • Smaller but specialised and sophisticated EU group 2 banks adopting the FIRB approach might face substantially lower capital requirements than under the current Accord.
  • The results indicate lower capital requirements under both the SA approach and the FIRB approach for smaller group 2 banks in the EU than for larger group 1 banks.
  • The results show an incentive to adopt the AIRB approach for group 1 banks, with an overall decrease of around 6% compared to the FIRB approach.
  • The change in capital charges for EU+6 group 2 banks in the SA is higher than in the EU.

    There is considerable variation in the extent to which capital requirements will rise or fall under the new capital rules for different portfolios.

    Importantly, the main source of reduction in capital requirements is the retail portfolio, which is mostly composed of loans to Small and Medium Enterprises (SMEs) below EUR 1 million and residential mortgage loans.

    Other important sources of decrease in the capital requirements are the exposures to corporate non-SME customers and to corporate-SME customers. This means that capital requirements for loans to large enterprises and SMEs will be generally no higher - and in many cases lower - than currently.

    Operational risk is the main source of increase in capital requirements, even though the capital charge will tend to be lower than the initially targeted figure of 12%.

    QIS 3 results
    Commission press release

    © European Commission


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