On Wednesday 20 December, the European Banking Authority (EBA) published an impact assessment of the new standards of the so-called Basel III prudential framework, which was officially finalised at the beginning of December by the world’s financial regulatory authorities meeting at the Basel Committee (see EUROPE 11921).
On the basis of data fed in by 148 banks in 17 member states of the EU on 31 December 2015, the report presents aggregate data on European banks assuming the full implementation of the Basel III framework and reflecting the standardised approaches to the credit risk and operational risk it brings in.
Overall, the results show that the base minimum capital requirements (Tier 1) of European banks would increase by 12.9% on the date of full implementation. To comply with the new framework, EU banks would need an extra €17.5 billion in CET1 capital and the total capital shortfall would be €39.7 billion, the EBA calculates.
Finally, the report states the 20.5% of banks in the sample would be constrained by the revision of the minimum capital requirements (“output floor”), which has been set at 72.5%, calculated on an aggregated basis over all risks.
Readers may recall that these new rules have still to be transposed into the legal orders of the various member jurisdictions of the Basel Committee before they become legally binding. The report is available at: http://bit.ly/2ky7zix (Original version in French by Marion Fontana)