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From Banking and Finance Law Daily, September 26, 2013

Basel Committee issues Basel III monitoring results

By Andrew A. Turner, J.D.

The Basel Committee has published the results of its most recent Basel III monitoring exercise, based on data as of Dec. 31, 2012. The latest report is the fourth publication of results of the Basel III monitoring exercise.

Information for the report was obtained by voluntary data submissions by individual banks to their national supervisors. 223 banks took part, including 101 Group 1 banks and 122 Group 2 banks. The estimates presented in the report generally assume full implementation of the final Basel III requirements and do not take into account any transitional arrangements. The Basel Committee points out that the results are not comparable to current industry estimates.

Data in the report show that shortfalls in the risk-based capital of large internationally active banks continue to shrink.

Basel III's Liquidity Coverage Ratio (LCR) was revised by the Committee in January 2013 and will come into effect on Jan. 1, 2015. The minimum requirement will be set initially at 60 percent and then rise in equal annual steps to reach 100 percent in 2019. The end-December 2012 reporting period was the first data collection exercise for which a comprehensive calculation of the revised LCR standard could be conducted. Given that such data was not collected for the end-June 2012 period, period-over-period comparisons for the LCR are not provided; however, end-December 2012 data are used to provide a comparison of the revised LCR standard issued in January 2013 with the original LCR standard issued in December 2010.

The weighted average LCR for the Group 1 bank sample was 119 percent. For Group 2 banks, the average LCR was 126 percent. These figures compare to average LCRs of 95 percent and 99 percent for Group 1 banks and Group 2 banks, respectively, based on the December 2010 version of the LCR standards. For banks in the sample, 68 percent reported an LCR that met or exceeded a 100 percent minimum requirement, while 90 percent reported an LCR at or above a 60 percent minimum requirement.

Basel III's longer-term structural liquidity standard— the Net Stable Funding Ratio (NSFR) — is currently under review by the Basel Committee to address any unintended consequences prior to its implementation by Jan. 1, 2018. Basel III monitoring results for the end-December 2012 reporting period give an indication of the impact of the standard's calibration based on the December 2010 text. The weighted average NSFR for the Group 1 bank sample improved slightly to 100 percent, compared with 99 percent at the June 2012 reporting date. For Group 2 banks, the average NSFR declined slightly to 99 percent, compared with 100 percent as of June 2012.

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