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Latest Basel III report shows banks made capital progress before virus outbreak

The Basel Committee on Banking Supervision on April 8 published the results of its latest Basel III monitoring exercise, showing that all large internationally active banks progressed further in meeting fully phased-in final Basel III capital requirements prior to the coronavirus outbreak.

The Group 1 banks — those with Tier 1 capital of more than €3 billion — had an average common equity Tier 1 ratio of 12.8% based on fully phased-in initial Basel III framework as of June 30, 2019, compared with 12.7% at the end of 2018.

For Group 2 banks, those that represent all other lenders, the ratio fell to 14.8% from 15.4% at the end of 2018.

The results are based on data prior to the breakout of the COVID-19 pandemic, but the committee said it can serve as a useful benchmark for analysis.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Group 1 banks' capital shortfalls declined to €16.6 billion at the target level — based on fully phased-in final Basel III framework with reduced estimation bias — at the end of June 2019, from €24.7 billion at 2018-end. Under conservative estimation, their capital shortfalls fell to €20.3 billion from €24.7 billion.

The weighted average liquidity coverage ratio remained stable at 136.2% for banks in the Group 1 sample and at 177% for Group 2 banks.

All banks in the sample reported a liquidity coverage ratio at 100% or more. The weighted average net stable funding ratio came in at 116.4% for Group 1 banks and at 120.1% for lenders in the second group.

As of June 2019, Group 1 and Group 2 banks' net stable funding ratios reached or exceeded 90%.

A total of 174 banks, including 105 large internationally active banks, participated in the Basel III monitoring exercise.