Big Banks Cut Basel III Shortfall

The gap in reserves narrowed to 115 billion euros at the end of 2012.

The largest global banks cut the shortfall in the reserves they’ll need to meet Basel capital rules by 82.9 billion euros ($112 billion) in the second half of 2012, leaving a gap of 115 billion euros.

“Shortfalls in the risk-based capital of large internationally active banks continue to shrink,” the Basel Committee on Banking Supervision said in a statement on its website. The capital gap narrowed by about 42 percent at the end of 2012 compared with the middle of last year, the group said. The requirements, known as Basel III, are scheduled to fully phase in by 2019.

Lenders also need to do further work to meet a planned binding limit on bank indebtedness, known as a leverage ratio, the Basel group said. A quarter of large global banks failed to meet the standard, it said.

Global regulators have clashed with lenders over the severity of capital, indebtedness and liquidity rules, which were set out in 2010 as part of an overhaul of banking regulation to avoid a repeat of the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. The Basel III measures will more than triple the core capital that lenders must hold to at least 7 percent of their assets, weighted for risk.

The biggest lenders in Europe account for 70.4 billion euros of the capital shortfall at the end of last year identified by the Basel committee, the European Banking Authority said in a separate statement today. They boosted their capital levels by 29 billion euros from June 2012, the EBA said.

Banks can plug gaps in capital by either boosting their reserves or by reducing their assets weighted for risk.

Both the EU and the U.S. missed a January 2013 deadline to begin phasing in the Basel standards on capital, and have said they will start the process from next year.

A sample of 222 banks surveyed by the Basel committee, including 101 large international lenders, had a combined shortfall of 563 billion euros in the easy-to-sell assets needed to meet one of the Basel liquidity rules, the group said. The liquidity coverage ratio is also set to fully apply from 2019.

The sample of banks also had a 2 trillion euro shortfall in the stable funding needed to meet a separate Basel requirement for banks to back long-term lending with funds that are unlikely to dry up in a crisis. This measure, known as a net-stable funding ratio, is under review by the Basel committee, and is scheduled to become a binding requirement on Jan. 1, 2018.

The Basel group defines large global banks as those with more than 3 billion euros in Tier 1 capital and which are internationally active.


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The U.S., U.K., Sweden and Switzerland are among nations that have promised to set tougher rules for their banks than required by Basel.


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