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EU regulator estimates €21.1B capital shortfall from final Basel III

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EU regulator estimates €21.1B capital shortfall from final Basel III

The European Banking Authority on April 8 published two reports measuring the impact of implementing the final Basel III reforms on EU banks' capital and monitoring the current implementation of liquidity measures in the bloc.

The results of its latest assessments are based on data as of June 30, 2019, and do not reflect the economic impact of the coronavirus pandemic, the EBA noted.

The Basel III capital monitoring exercise results generally show that banks' minimum Tier 1 capital requirement would increase by 16.1% across all participating banks in the sample once the reforms are fully implemented in 2028.

The weighted average change in total Tier 1 minimum required capital for Group 1 banks — those with Tier 1 capital of more than €3 billion and internationally active — was 17.3%, while it stood at 8.1% for the other lenders, which are categorized as Group 2 banks.

The EBA estimates the Tier 1 capital shortfall for all banks in the sample, under the full implementation of final Basel III, at roughly €21.1 billion. For Group 1 and Group 2 banks, the shortfalls are estimated at €18.3 billion and €2.8 billion, respectively.

Meanwhile, the EBA said the liquidity coverage ratio of EU banks stood at roughly 147% on average as of the end of June 2019. 78% of the banks in the sample had a liquidity coverage ratio above 140%.

The ratio has been more than 100% since September 2016, according to the regulator. The aggregate liquidity shortfall amounted to €4.7 billion as of June 30, 2019.

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