16 December 2010
The Committee of European Banking Supervisors (CEBS) has conducted a comprehensive European quantitative impact study (EU-QIS) to analyse the impact of the new requirements to raise the quality and level of the capital base, to enhance risk capture, to contain excessive leverage and to introduce new liquidity standards for the global banking system, collectively referred to as "Basel III". These new requirements were originally proposed in July and December 2009 by the Basel Committee on Banking Supervision (BCBS), agreed by the Group of Governors and Heads of Supervision (GHOS), its oversight body, at its 12 September 2010 meeting and finally endorsed by the G20 Leaders at their November Seoul Summit. Therefore, this study will be used as a key input by the European Commission in preparing the impact assessment that will accompany the CRD IV legislative proposals.
This report summarizes the results of the comprehensive EU-QIS by providing aggregated analysis of bank data collected by national supervisors. A total of 246 banks from CEBS member countries participated in the study and were requested to submit consolidated data as of 31 December 2009. CEBS appreciates the significant efforts banks and national supervisors contributed to this data collection exercise.
The estimates presented assume full implementation of the final Basel III package, based on data as of 31 December 2009 and, unless noted otherwise, do not take into account any transitional arrangements such as phase-in of deductions and grandfathering arrangements. No assumptions have been made about banks' future profitability or behavioural responses. For this reason the QIS results are not comparable to industry estimates, which tend to be based on forecasts and consider management actions to mitigate the impact as well as incorporate estimates where information is not publicly available.
The key results of the impact study are the following:
Including the effect of all changes to the definition of capital and risk-weighted assets, as well as assuming full implementation, the common equity Tier 1 ratio for Group 1 banks (Group 1 banks are those that have Tier 1 capital in excess of €3 billion EUR, are well diversified, and are internationally active. All other banks are considered to be Group 2 banks) would be 4.9%, on average (Group 2: 7.1%). The Tier 1 capital ratio of Group 1 banks would decline on average from 10.3% to 5.6%, while the total capital ratio would decrease from 14.0% to 8.1%. The decline in capital ratios would be less pronounced for Group 2 banks. The Tier 1 capital ratio would decrease from 10.3% to 7.6% and the total capital ratio would decline from 13.1% to 10.3%.
Calculated on the same basis, the estimated capital shortfall for Group 1 banks in the QIS sample would be between €53 billion for the CET1 minimum requirement of 4.5% and €263 billion for a CET1 target level of 7.0% (including the capital conservation buffer), had the Basel III requirements been in place at the end of 2009. The amount of additional CET1 capital required for Group 2 banks in the QIS sample is estimated at €9 billion in order to reach the CET1 minimum of 4.5%. For a CET1 target level of 7%, Group 2 banks would need €28 billion.
The weighted average leverage ratio using the new definition of Tier 1 capital and the measure of exposure agreed by the GHOS would be 2.5% for Group 1 banks and 3.5% for Group 2 banks.
The new liquidity standards would result in an average liquidity coverage ratio of 67% for Group 1 banks and 87% for Group 2 banks. The average net stable funding ratio would be 91% and 94%, respectively.