Basel Committee

on Banking Supervision

Basel III
Monitoring Report
February 2023
 Queries regarding this document should be addressed to the Secretariat of the Basel Committee on
Banking Supervision (e-mail: [email protected]).
Since the report published in September 2021, the monitoring reports no longer include a statistical annex.
However, the data underlying the graphs are available for download as a separate Excel file. This presents
the same data as the Annex in previous reports but in a format that is easier to use for readers’ own
analyses. Some analyses that were previously presented in the leverage ratio, liquidity and credit risk
sections of the report have been published as Tableau dashboards. Additional analyses presented in the
report will be made available in this innovative format in the coming months. The Committee welcomes
any feedback on these new formats at [email protected].

This publication is available on the BIS website (www.bis.org/bcbs/qis/).

Grey underlined text in this publication shows where hyperlinks are available in the electronic version.

© Bank for International Settlements 2023. All rights reserved. Brief excerpts may be reproduced or
translated provided the source is stated.

ISBN 978-92-9259-508-1 (online)

Basel III Monitoring Report

February 2023

Highlights of the Basel III monitoring exercise as of 30 June 2022............................................................................... 1

Detailed results of the Basel III monitoring exercise as of 30 June 2022 .................................................................. 15

1. General remarks ...................................................................................................................................................................... 15

1.1 Scope of the monitoring exercise .......................................................................................................................... 16
1.2 Sample of participating banks ................................................................................................................................. 16
1.3 Methodology .................................................................................................................................................................. 17
1.3.1 Aggregation .................................................................................................................................................. 17
1.3.2 Impact metrics ............................................................................................................................................. 18
1.3.3 Presentation .................................................................................................................................................. 19
1.3.4 Time series analysis and comparisons ............................................................................................... 19
1.4 Data quality ..................................................................................................................................................................... 20
1.5 Interpretation of results.............................................................................................................................................. 20

2. Regulatory capital requirements and TLAC ................................................................................................................. 22

2.1 Risk-based capital ratios ............................................................................................................................................ 23
2.1.1 Initial Basel III standards .......................................................................................................................... 23
2.1.2 Final Basel III standards ............................................................................................................................ 28
2.2 Impact of the final Basel III framework on minimum required capital .................................................... 29
2.3 Leverage ratio ................................................................................................................................................................. 34
2.3.1 Overall results .............................................................................................................................................. 34
2.3.2 Impact on Basel III leverage ratio MRC measure due to the final standards ..................... 39
2.4 Combined shortfall amounts under the final Basel III framework ............................................................. 40
2.5 Total loss-absorbing capacity requirements for G-SIBs ................................................................................ 41
2.5.1 Initial Basel III framework ........................................................................................................................ 41
2.5.2 Final Basel III framework .......................................................................................................................... 42

3. Level and composition of regulatory capital............................................................................................................... 43

3.1 Level of capital ............................................................................................................................................................... 43
3.2 Profits, dividends and capital raised ...................................................................................................................... 44
3.3 Composition of capital................................................................................................................................................ 47
3.4 Regulatory adjustments ............................................................................................................................................. 49

Basel III Monitoring Report February 2023 iii

4. Components and determinants of risk-based capital requirements .................................................................50
4.1 Share of different risk types in overall MRC under current rules ...............................................................50
4.2 Credit risk .........................................................................................................................................................................53
4.2.1 Share of credit risk exposure by asset classes under the current rules ................................. 53
4.2.2 Impact of revisions to the standardised and IRB approaches for credit risk on MRC ..... 54
4.2.3 Standardised approach for credit risk ................................................................................................56
4.2.4 Internal ratings-based approach for credit risk ..............................................................................58
4.2.5 Impact of revisions to credit risk on MRC over time ....................................................................62
4.2.6 Distribution of exposure at default and risk-weighted assets across approaches ........... 64
4.2.7 Impact of the revised securitisation framework .............................................................................66
4.3 Counterparty credit risk and credit valuation adjustment risk ....................................................................71
4.3.1 Counterparty credit risk ...........................................................................................................................71
4.3.2 Credit valuation adjustment risk ...........................................................................................................73
4.4 Market risk .......................................................................................................................................................................77
4.4.1 Current market risk rules .........................................................................................................................77
4.4.2 Overall impact of the revised minimum capital requirements for market risk .................. 79
4.4.3 Revised model validation tests ..............................................................................................................81
4.5 Operational risk..............................................................................................................................................................82
4.5.1 Current operational risk rules ................................................................................................................82
4.5.2 Final operational risk standards ............................................................................................................84

5. Interactions between risk-based, output floor and leverage ratio capital requirements .......................... 88
5.1 Relationship between the Basel III leverage ratio and risk-based capital requirements under
fully phased-in initial Basel III standards .............................................................................................................88
5.2 Interactions between risk-based, output floor and leverage ratio capital requirements under
the final Basel III standards .......................................................................................................................................89

6. Liquidity ......................................................................................................................................................................................91
6.1 Liquidity Coverage Ratio ............................................................................................................................................91
6.2 Net Stable Funding Ratio ...........................................................................................................................................92
6.3 Liquidity Coverage Ratio and Net Stable Funding Ratio shortfalls over time ...................................... 93

7. Exposures to cryptoassets................................................................................................................................................ 101

7.1 Data and sample......................................................................................................................................................... 101
7.2 Overall amounts of prudential exposures and assets under custody ................................................... 102
7.3 Composition of prudential exposures ............................................................................................................... 103

iv Basel III Monitoring Report February 2023

Special feature

Regional distributions of Group 1 and Group 2 banks and their impact on results in the Basel III
monitoring reports ...................................................................................................................................................................... 105

Martin Birn, Lea Charlotte Neugebauer, Verena Seidl

Annexes

Annex A: Basel III standards and phase-in arrangements ............................................................................................ 109

Annex B: Sample statistics ........................................................................................................................................................ 113

Previous monitoring reports published by the Basel Committee ............................................................................. 117

Basel III Monitoring Report February 2023 v

Conventions used in this report

billion thousand million

trillion thousand billion
lhs, rhs left-hand scale, right-hand scale
Group 1 banks are those that have Tier 1 capital of more than €3 billion and are internationally active. All
other banks are considered Group 2 banks.
Components may not sum to totals because of rounding.
The term “country” as used in this publication also covers territorial entities that are not states as
understood by international law and practice but for which data are separately and independently
maintained.
All data, including for previous reporting dates, reflect revisions received up to 18 January 2023.

vi Basel III Monitoring Report February 2023

Quantitative Impact Study Group
of the Basel Committee on Banking Supervision

Chairman Martin Birn, Secretariat of the Basel Committee on Banking Supervision,

Bank for International Settlements, Basel

The representatives in italics are members of the analysis team and provided analytical support at the
Secretariat.

Argentina Griselda Amalia Martiarena Central Bank of Argentina

Australia Adam Trevorrow Australian Prudential Regulation Authority
Belgium Sabina Bernardo National Bank of Belgium
Saif Chaibi
Brazil Felipe Rocha Central Bank of Brazil
Rodrigo Debs
Canada Louis Bélisle Office of the Superintendent of Financial Institutions
Osman Khan
China Shijie Zhou China Banking and Insurance Regulatory
Commission
France Déborah Leboullenger French Prudential Supervisory Authority
Numa Bosc
Louis-Edouard Genty
Cédric Morineau
Jerry Simpson
Germany Ingo Torchiani Deutsche Bundesbank
Dennis Laux
Lea Charlotte Neugebauer
Michael Schoeppe Federal Financial Supervisory Authority
Thomas Blumentritt
Alexandra Gebauer
India Nitin Jain Reserve Bank of India
Indonesia Tony Indonesia FSA (OJK)
Italy Mauro Marinelli Bank of Italy
Salvatore Di Bella
Japan Yui Matsui Bank of Japan
Kaori Yamamoto Financial Services Agency
Kazuya Kurihara
Korea Junehong Heo Financial Supervisory Service
Luxembourg Natalia Katilova Surveillance Commission for the Financial Sector
Fernando Pérez Castaños-Mollor
Mexico Juan Cardenas Bank of Mexico
Javier Flores National Banking and Securities Commission

Basel III Monitoring Report February 2023 vii

Netherlands Monique Smit Netherlands Bank
Begüm Aslan
Caspar Van Niekerk
Saudi Arabia Mohammad Alsuhaibani Saudi Arabian Monetary Authority
Singapore Sandy Ho Monetary Authority of Singapore
South Africa Tebogo Ntseane South African Reserve Bank
Spain David Barra Bank of Spain
Monica Griga
Sweden Andreas Borneus Finansinspektionen
Switzerland Philippe Brügger Swiss Financial Market Supervisory Authority FINMA
Turkey Aydan Aydin Inan Banking Regulation and Supervision Agency
United Kingdom Sonia Odedra Prudential Regulation Authority
United States Anlon Panzarella Board of Governors of the Federal Reserve System
Christopher Anderson
Alexander Jiron
Bert Loudis
Victoria Maizenberg
Timothy Mooney
Victor Castaneda Federal Reserve Bank of New York
Andrea Plante Federal Deposit Insurance Corporation
Kyle McCormick
Benjamin Pegg Office of the Comptroller of the Currency

European Central Pär Torstensson ECB

Bank Kallol Sen ECB Single Supervisory Mechanism
Laura Comino Suarez
Salvador Hernandez Martinez

Observers Lampros Kalyvas European Banking Authority

Markus Wintersteller European Commission
Peik Granlund Finnish Financial Supervisory Authority

viii Basel III Monitoring Report February 2023

Secretariat Verena Seidl Bank for International Settlements
Irina Barakova
Renzo Corrias
Pablo de Carvalho
Tomas Edlund
Markus Grimpe
Yuka Kanai
Noel Reynolds
Nadia Esham
Bettina Farkas
Lovrenc Orazem
Roberto Ottolini
Andrea Rolando
Eleonora Scognamiglio
Vasileia Xezonaki
Markus Zoss

Basel III Monitoring Report February 2023 ix

Highlights of the Basel III monitoring exercise as of 30 June 2022

After their record high at end-2021, initial Basel III capital ratios fall to pre-
pandemic levels

Liquidity ratios decline but remain above pre-pandemic levels

To assess the impact of the Basel III framework on banks, the Basel Committee on Banking Supervision
monitors the effects and dynamics of the reforms. For this purpose, a semiannual monitoring framework
has been set up on the risk-based capital ratio, the leverage ratio and the liquidity metrics using data
collected by national supervisors on a representative sample of institutions in each country. Since the end-
2017 reporting date, the report also captures the effects of the Committee’s finalisation of the Basel III
reforms. 1 This report summarises the aggregate results using data as of 30 June 2022. 2 It includes a special
feature on Regional distributions of Group 1 and Group 2 banks and their impact on results in the Basel III
monitoring reports. The Committee believes that the information contained in the report will provide
relevant stakeholders with a useful benchmark for analysis.
Information considered for this report was obtained by voluntary and confidential data
submissions from individual banks and their national supervisors. On the jurisdictional level, there may be
mandatory data collections ongoing, which also feed into this report. Data were included for 181 banks,
including 114 large internationally active (“Group 1”) banks, among them all 30 G-SIBs and 66 other
(“Group 2”) banks. 3 Members’ coverage of their banking sector is very high for Group 1 banks, reaching
100% coverage for some countries, while coverage is lower for Group 2 banks and varies by country.
In general, this report does not consider any transitional arrangements such as grandfathering
arrangements. Rather, the estimates presented generally assume full implementation of the Basel III
requirements based on data as of 30 June 2022. No assumptions have been made about banks’
profitability or behavioural responses, such as changes in bank capital or balance sheet composition, either
since this date or in the future. Furthermore, the report does not reflect any additional capital requirements
under Pillar 2 of the Basel III framework or any higher loss absorbency requirements for domestic
systemically important banks, nor does it reflect any countercyclical capital buffer requirements.

1
Basel Committee on Banking Supervision, High-level summary of Basel III reforms, December 2017, www.bis.org/bcbs/publ/
d424_hlsummary.pdf; Basel Committee on Banking Supervision, Basel III: Finalising post-crisis reforms, December 2017,
www.bis.org/bcbs/publ/d424.htm.
2
A list of previous publications is included in the Annex.
3
Group 1 banks are those that have Tier 1 capital of more than €3 billion and are internationally active. All other banks are
considered Group 2 banks. Not all banks provided data relating to all parts of the Basel III framework.

Basel III Monitoring Report February 2023 1

 Overview of results Table 1

31 December 20211 30 June 2022

Group 1 Of which: Group 2 Group 1 Of which: Group 2
G-SIBs G-SIBs
Initial Basel III framework
CET1 ratio (%) 13.4 13.1 17.7 12.7 12.6 16.9
Target capital shortfalls (€ bn)2 0.0 0.0 0.0 0.0 0.0 0.0
TLAC shortfall 2022 minimum (€ bn) 7.5 7.5 35.1 35.1
Total accounting assets (€ bn) 81,399 56,353 4,414 84,094 61,185 2,459
Leverage ratio (%)3 6.6 6.5 6.3 6.0 5.9 5.8
LCR (%) 140.9 138.5 221.9 138.4 137.5 220.1
NSFR (%) 125.1 126.9 134.3 123.5 125.2 132.5
Fully phased-in final Basel III framework (2028)
Change in Tier 1 MRC at the target level (%) 2.4 2.3 5.7 2.8 3.2 -2.0
CET1 ratio (%) 13.0 12.9 14.4 12.5 12.5 14.5
Target capital shortfalls (€ bn); of which: 0.3 0.3 1.2 7.8 7.8 0.0
CET1 0.0 0.0 0.4 3.5 3.5 0.0
Additional Tier 1 0.0 0.0 0.4 1.9 1.9 0.0
Tier 2 0.3 0.3 0.5 2.4 2.4 0.0
TLAC shortfall 2022 minimum (€ bn) 7.5 7.5 29.8 29.8
Leverage ratio (%) 3
6.4 6.3 6.2 6.0 6.0 5.9
See Table A.4 for the target level capital requirements. 1
The values for the previous period may differ slightly from those published in
the end-December 2021 report at the time of its release. This is caused by data resubmissions for previous periods to improve the
underlying data quality and enlarge the time series sample. 2 Uses the 2017 definition of the leverage ratio exposure measure. 3 The
leverage ratios reflect temporary exclusions from leverage exposures introduced in some jurisdictions.

Source: Basel Committee on Banking Supervision.

• Compared with the end-December 2021 reporting period, the average Common Equity Tier 1
(CET1) capital ratio under the initial Basel III framework fell to 12.7% for Group 1 banks.
• The average impact of the final Basel III framework on the Tier 1 Minimum Required Capital (MRC)
of Group 1 banks is slightly higher (+2.8%) when compared with the 2.4% increase at end-
December 2021. The average increase for G-SIBs is 3.2%.
• After reporting an all-time low for capital shortfalls in December 2021, June 2022 shows an
increase in capital shortfalls once again, marking the highest value since H1 2020 for Group 1
banks and G-SIBs due to an improvement in data reporting quality.
• Applying the 2022 minimum TLAC requirements and the initial Basel III framework, three of the
25 G-SIBs reporting total loss-absorbing capacity (TLAC) data reported an aggregate incremental
shortfall of €35.1 billion when adding back temporary leverage ratio exemptions.
• Group 1 banks’ average Liquidity Coverage Ratio (LCR) fell from 140.9% to 138.4% while the
average Net Stable Funding Ratio (NSFR) fell from 125.1% to 123.5%.
• Group 2 banks’ results based on the unbalanced sample should not be compared with the
previous period due to significant changes in the sample.

2 Basel III Monitoring Report February 2023

After their record high end-2021, initial Basel III capital ratios decreased to pre-
pandemic levels
Group 1 banks, balanced data set Graph 1

CET1, Tier 1 and total capital ratios1 Determinants of changes2 Tier 1 ratios by region3
Per cent Per cent Per cent

15 15 15

10 10 10

5 5 5

0 0 0

−5 −5 −5
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CET1 Tier 1 capital ratio Europe
Tier 1 Change in Tier 1 capital Americas
Total capital Change in RWA Rest of the world
1
The solid lines depict the relevant minimums, the dotted lines the minimums plus the capital conservation buffer. See Table A.4 for the
relevant levels. 2 Exchange rates as of the current reporting date. 3 See Table B.1 for the composition of the regions.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• The balanced data set for Group 1 banks showed a decrease in initial Basel III capital ratios in
H1 2022, driven by an increase in RWA and a decrease in Tier 1 capital. Capital ratios are back to
their pre-pandemic levels. The overall CET1 capital ratios for Group 1 banks in the balanced data
set were 12.7% in June 2022.
• Currently, the Tier 1 capital ratios are higher in Europe than in the Americas and the rest of the
world region. However, when compared with data starting from 2011, this relationship used to
be reversed before 2014. Also, the decrease over H1 2022 has been particularly strong in Europe.

Basel III Monitoring Report February 2023 3

Impact of final Basel III standards for Group 1 banks slightly higher compared
with previous exercise
Change in Tier 1 MRC at the target level due to the final Basel III standards Graph 2

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent of overall basis MRC Per cent of overall basis MRC Per cent of overall basis MRC

120 120 120

115 115 115

110 110 110

105 105 105

100 100 100

95 95 95

90 90 90

Leverage ratio
Leverage ratio

CVA
CVA

Credit risk

Market risk

Op risk
Credit risk

Market risk

Op risk

Other Pillar 1
Other Pillar 1

Total
Total

Output floor
Output floor

Leverage ratio
CVA
Credit risk

Market risk

Op risk

Other Pillar 1

Total
Output floor
Credit risk shows the change in MRC due to revised standardised and internal ratings-based approaches, including securitisation. Operational
risk figures may not show supervisor-imposed capital add-ons under Pillar 2. Therefore, changes in MRC may be overestimated. Output floor
results are net of the existing Basel I-based floor according to national implementation of the Basel II framework. The target level accounts
for Tier 1 minimum capital requirements and the capital conservation buffer (ie resulting in an 8.5% Tier 1 capital requirement), as well as any
applicable G-SIB surcharge.

Source: Basel Committee on Banking Supervision. See also Table 4.

• For Group 1 banks, the Tier 1 minimum required capital (MRC) would increase by 2.8%, following
the full phase-in of the final Basel III standards. This increase comprises a 2.7% rise in the
combined risk-based components. Those are driven by positive contributions of the output floor
(+1.7%), market risk (+1.6%), CVA (+0.4%) on the one hand and a reduction in credit risk (-1.0%)
on the other hand. The rise of the combined risk-based components is accompanied by the
positive effect of the leverage ratio requirements (+0.1%).
• The impact on MRC across regions varies considerably for Group 1 banks with a moderate
decrease in the rest of the world (–3.9%), a small increase shown in the Americas (+1.9%) and, in
contrast, a strong increase in MRC for European banks (+15.9%).
• For Group 2 banks, the overall 2.0% decrease in Tier 1 MRC is driven by an increase in the risk-
based measure of 7.9%, stemming mainly from the output floor (+5.0%) and credit risk (+2.3%),
while the leverage ratio measure partially offsets this increase at –9.9%.
• The average impact of the final Basel III framework on Group 1 banks at +2.8% is 40 basis points
higher than at end-2021 (+2.5%), driven by a smaller decrease in the rest of the world region.
• For Group 2 banks, we notice two important changes in the recent period. One being a noticeable
spike in the upper bound and in dispersion in June 2021 reflecting improvements in data
reporting quality and leverage ratio exemptions accounting approach. The other being a
significant drop in Group 2 overall impact and dispersion towards the negative reflecting a
change in the Group 2 banks sample 4 for the June 2022 exercise.

4
Please refer to the special feature on Regional distributions of Group 1 and Group 2 banks and their impact on results in the
Basel III monitoring reports on page 105 at the end of this report.

4 Basel III Monitoring Report February 2023

Fully phased-in Basel III leverage ratios1 of large internationally active banks
decreased in H1 2022
Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 3

Leverage ratios and their determinants Leverage ratios by region

Per cent Per cent

7.5 7.5

5 6

2.5 4.5

0 3

−2.5 1.5

−5 0

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Leverage ratio Change in Tier 1 capital Europe Americas Rest of the world
Change in exposure measure
1
Data points from H1 2011 to H2 2012 use the original definition of the leverage ratio. Data points from H1 2013 to H1 2017 use the
definition of the leverage ratio set out in the 2014 version of the framework. Note that the data points for H1 2013 use an approximation for
the initial definition of the Basel III leverage ratio exposure where gross instead of adjusted gross securities financing transaction values are
used. Data points from H2 2017 onwards use the final definition of the leverage ratio to the extent data are available. Temporary exclusions
from the leverage ratio exposure measure in the context of Covid-19 have not been added back.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• For the full sample at the end-June 2022 reporting date, the average fully phased-in final Basel III
Tier 1 leverage ratios are 6.0% for Group 1 banks and G-SIBs and 5.9% for Group 2 banks.
• For the balanced data set of Group 1 banks, the leverage ratio decreased from the prior period,
driven by banks in Europe and the Americas. Leverage ratios in the Americas are at their lowest
level since end-June 2014.
• Leverage ratios are still lower in Europe (5.0%) as compared with the Americas (5.8%) and the rest
of the world (7.2%).

Basel III Monitoring Report February 2023 5

Combined capital shortfalls at the target level under the final Basel III standards
increased for large internationally active banks
Fully phased-in final Basel III standards,1 sample and exchange rates as at the reporting dates Graph 4

Group 1 banks Of which: G-SIBs Group 2 banks

EUR bn EUR bn EUR bn

80 80 8

60 60 6

40 40 4

20 20 2

0 0 0
H2 2015
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022

H2 2015
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022

H2 2015
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022
CET1 Additional Tier 1 Tier 2
1
Results for H2 2015 are based on the Committee’s cumulative Quantitative Impact Study and are not fully comparable from a
methodological point of view. Compared with H2 2017 and H1 2018, the results since H2 2018 include the revised market risk framework as
finalised in January 2019.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• For this reporting date, Group 1 banks registered total regulatory capital shortfalls amounting to
€7.8 billion, compared with €0.1 billion at end-June 2020. This marks the highest value since
H1 2020 for Group 1 banks and G-SIBs due to an improvement in data reporting quality.
• For Group 2 banks, H1 2022 is the first reporting date that shows no CET1, additional Tier 1 or
total regulatory capital shortfall at the target level. This is in line with the aggregate total capital
shortfall steadily decreasing since 2018. The total absence of capital shortfalls of Group 2 banks
is due to a change in the sample.

6 Basel III Monitoring Report February 2023

Fully phased-in regulatory CET1 decreased during H1 2022 for large
internationally active banks, dividend payout ratio back to pre-pandemic levels
Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 5

Level of capital Change in CET1 by region Profits, dividends and CET1 capital
raised externally1
EUR bn June 2011 = 100 Per cent EUR bn

50 250
4,000
300
40 200
3,000
200 30 150
2,000
20 100
100
1,000
10 50

0 0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CET1 Europe Profit after tax (rhs)
Additional Tier 1 Americas Common share dividends (rhs)
Tier 2 Rest of the world CET1 raised (rhs)
Dividend payout ratio (lhs)
1
The dividend payout ratio is calculated as common share dividends divided by profits after tax by using a rolling 12-month window.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheets “Graph 33a”, and
“Graph 36” provide an additional regional breakdown for Group 1 banks.

• From end-June 2011 to end-June 2022, the level of Group 1 banks’ CET1 capital has increased by
128% from €1,860 billion to €4,227 billion. Since end-December 2021, Group 1 CET1 capital has
decreased by €47 billion (or 1.1%).
• At a regional level, while CET1 capital in the rest of the world is now more than three times its
value in 2011, the increase in Europe and in the Americas was more limited at 71% and 84%,
respectively. The decrease over H1 2022 was particularly strong in Europe.
• Overall, Group 1 banks’ profits after tax decreased only marginally for the banks in the sample
and stand at €263 billion in H1 2022. The dividend payout ratio stands at 33.5%, its highest value
since end-2018. This can be explained by banks no longer facing the dividend payout restrictions
that were introduced at the beginning of the Covid-19 pandemic.

Basel III Monitoring Report February 2023 7

Profits remained at or near record high levels across all regions
Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 6

Europe Americas Rest of the world

Per cent EUR bn Per cent EUR bn Per cent EUR bn

100 125 100 125 100 125

80 100 80 100 80 100

60 75 60 75 60 75

40 50 40 50 40 50

20 25 20 25 20 25

0 0 0 0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Profit after tax (rhs) Common share dividends (rhs) CET1 raised (rhs)
Dividend payout ratio (lhs)

The dividend payout ratio is calculated as common share dividends divided by profits after tax by using a rolling 12-month window.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• Annual after-tax profits for the Group 1 banks in the sample saw a particularly strong increase in
Europe and the rest of the world compared with the 12-month period ending June 2021.
• Since the previous reporting date, the annual dividend payout ratios have increased in all regions,
reaching pre-pandemic levels. In the Americas, they are still significantly below the record-high
ratios observed in 2019 and 2020.

8 Basel III Monitoring Report February 2023

Analysis of share of MRC by asset class1 according to current rules shows increase
in operational risk MRC and decreased in securitisations and market risk
Balanced data set Graph 7

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

100 100 100

80 80 80

60 60 60

40 40 40

20 20 20

0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Corporate Retail Related entities Operational risk Total (June 2011=100)
Bank Partial use CVA Floors
Sovereign Securitisation Market risk Other
1
Exposures subject to partial use of the standardised approach for credit risk that cannot be assigned to a specific portfolio, as well as past-
due items under the standardised approach, are listed separately as “partial use”. “Related entities” includes capital requirements specified in
Part 1 of the Basel II framework. The category “other” includes capital requirements for other assets; the current Basel I-based output floor;
Pillar 1 capital requirements in member countries for risks not covered by the Basel framework; reconciliation differences; and additional
capital requirements due to regulatory calculation differences and general provisions. The latter item can lead to negative capital requirements
in cases where there is an excess in provisions, which can be recognised in a bank’s Tier 2 capital. Furthermore, for banks that apply the
standardised approach, general provisions may be recognised to some extent as Tier 2 capital; consequently, MRC is reduced by this amount.
The term “reconciliation differences” refers to the difference between MRC reported at the entire bank level and the sum of MRC reported
for the individual portfolios.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• As of end-June 2022 and for a balanced data set of Group 1 banks, credit risk 5 continues to
compose the dominant portion of overall minimum required capital (MRC), on average
comprising 65.4% of total MRC. However, the share of credit risk has declined significantly from
75.6% at the end of June 2011.
• Conversely, the share of operational risk MRC increased sharply from 7.7% at end-June 2011 to
14.5% at end-2015 and decreased slightly since. The increase in the early 2010s was attributed in
large part to the surge in the number and severity of operational risk events during and after the
financial crisis, which are factored into the calculation of MRC for operational risk under the
advanced measurement approach. More recently, we have observed some “fading out” of the
financial crisis losses so that, in 2020, the lowest loss level of the past 10 years was observed. This
explains the latest decrease in capital requirements especially for the banks heavily affected in
the financial crisis. On the other hand, losses triggered by the Covid-19 pandemic have not yet
had a significant impact on the loss severity level but this may change given that the pandemic
is still ongoing.
• Among the credit risk asset classes, the share of MRC for corporate exposures increased from
31.9% to 38.0% between June 2011 and June 2021 before decreasing again to 37.0% at end-June
2022. The share of MRC for securitisation exposures declined from 5.8% to 2.1% between June
2011 and June 2022.

5
Here overall credit risk is defined as the sum of corporate, bank, retail, sovereign, partial-use, securitisations and related entities
as illustrated in the graph.

Basel III Monitoring Report February 2023 9

Average LCRs and NSFRs declined, and some banks in the Americas and the rest
of the world continued to use LCR reserves during the Covid-19 pandemic1
Overall distribution Graph 8

Liquidity Coverage Ratio2 Net Stable Funding Ratio

Per cent Per cent
^ ^ ^
180
300
160

200 140

120
100
100

0 80
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks
1
The median value is represented by a horizontal line, with 50% of the values falling in the 25th to 75th percentile range shown by the box.
The upper and lower end points of the thin vertical lines show the range of the entire sample. In some cases, arrows at the top of the vertical
line indicate banks with ratios outside the range shown in the graph. The dots represent weighted averages. 2 The sample is capped at
400%, meaning that all banks with an LCR above 400% were set to 400%. The dots represent weighted averages. The horizontal line represents
the 100% minimum (applicable from 1 January 2019).

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• The weighted average LCR at end-June 2022 is 138.4% for Group 1 banks and 220.1% for Group 2
banks.
• In the current reporting period there are three Group 1 banks with an LCR below 100% and hence
a shortfall (ie the difference between high quality liquid assets and net cash outflows) which
amounts to €14.8 billion.
• The weighted average NSFR was 123.5% for Group 1 banks and 132.5% for Group 2 banks at
end-June 2022.
• All banks reported an NSFR that met or exceeded 100%.

10 Basel III Monitoring Report February 2023

For Group 1 banks, LCRs and NSFRs decreased on average but remain above pre-
pandemic levels; LCR shortfall remained stable during H1 2022
Group 1 banks, balanced data set1 Graph 9

LCR, NSFR and related shortfalls2 LCR and change in its determinants3 NSFR and change in its
determinants3
Per cent EUR bn Per cent Per cent Per cent Per cent

140 20 140 20
140 1,000

130 15 130 15
120 750
120 10 120 10
100 500
110 5 110 5

80 250
100 0 100 0

60 0 90 −5 90 −5
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Ratio (lhs): Shortfall (rhs): LCR (lhs) NSFR (lhs)
LCR LCR Change in HQLA (rhs) Change in ASF (rhs)
NSFR NSFR Change in net outflows (rhs) Change in RSF (rhs)
1
As described in Section 6.3, footnote 49, the NSFR time series depicts data reflecting NSFR standards released in December 2010, January
2014 and October 2014. 2 Exchange rates as at the reporting dates. 3 Exchange rates as of the current reporting date.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. The worksheets “Graph 82”,
“Graph 85” and “Graph 89” provide additional regional breakdowns for Group 1 banks. The liquidity dashboards on the Committee’s website
provide the same breakdowns also for G-SIBs.

• For a balanced data set of Group 1 banks, not all banks meet a 100% LCR at end-December 2021,
resulting in an aggregate shortfall of €6.6 billion. 6 The shortfall has increased by €0.6 billion since
end-2021. The average LCR for this sample decreased to 138.7% from 143.0% at end-2021.
• There was again no aggregate NSFR shortfall for the balanced data set of Group 1 banks. The
average NSFR for the same sample of banks has decreased to 122.8% from 124.3% at end-2021.
• Both ratios are still above pre-pandemic levels.

6
Note that the LCR shortfall in the entire sample at end-June 2022 is €14.8 billion.

Basel III Monitoring Report February 2023 11

Group 2 banks showed a decrease in the LCR and NSFR with no shortfalls; both liquidity
ratios remained significantly above pre-pandemic levels
Group 2 banks, balanced data set1 Graph 10

LCR, NSFR and related shortfalls2 LCR and change in its determinants3 NSFR and change in its
determinants3
Per cent EUR bn Per cent Per cent Per cent Per cent

250 50 150 20
225 30
225 40 140 15
200 25
130 10
200 30
175 20 120 5
175 20
150 15 110 0
150 10
100 −5
125 10
125 0
90 −10
100 5 100 −10 80 −15
75 0 75 −20 70 −20
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
LCR (lhs): Shortfall (rhs): LCR (lhs) NSFR (lhs)
LCR LCR Change in HQLA (rhs) Change in ASF (rhs)
NSFR NSFR Change in net outflows (rhs) Change in RSF (rhs)
1
As described in Section 6.3, footnote 49, the NSFR time series depicts data reflecting NSFR standards released in December 2010, January
2014 and October 2014. 2 Exchange rates as at the reporting dates. 3 Exchange rates as of the current reporting date.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• For a balanced data set of Group 2 banks, the LCR shortfall has remained at zero since June 2019.
The average LCR for the same sample of banks decreased by 15.1 percentage points to 208.3%.
• The aggregate NSFR shortfall remained at zero for the balanced data set of Group 2 banks. The
average NSFR for the same sample of banks decreased by 1.5 percentage points to 128.2%.
• Both liquidity ratios remain significantly above pre-pandemic levels. At end-2019, the LCR of the
same sample of Group 2 banks stood at 163.0%, the NSFR at 117.3%.

12 Basel III Monitoring Report February 2023

For Group 1 banks, LCRs decreased in Europe during H1 2022, while NSFRs
continued to decrease in the Americas
Group 1 banks, balanced data set Graph 11

LCR NSFR1
Per cent Per cent

180 180

160 160

140 140

120 120

100 100

80 80
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Europe Americas Rest of the world

1
As described in the Section 6.2, the NSFR time series depicts data reflecting NSFR standards released in December 2010, January 2014 and
October 2014.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

• Since 2019, the weighted average LCR for each of Europe and the rest of the world was above
140%, while the average LCR of the Americas is around 120%. While Europe and the Americas
had initially lower average LCRs compared with the rest of the world, the average LCRs of Europe
and the rest of the world tended to converge gradually before the onset of the pandemic. The
regions with lower end-2012 average ratios saw important increases in particular between end-
2012 and June 2014, and Europe again since the start of the pandemic. The increase in Europe is
now reversing, although the LCR of European banks is still above end-2019 levels.
• The weighted average NSFR at end-June 2021 for Group 1 banks in each of the three regions was
well in excess of 100%. The average NSFRs in Europe and the Americas have increased from
111.5% and 111.2% at end-December 2019, respectively, to 120.2% and 123.2% at end-June
2022. The increase in the Americas to an all-time high of 135.2% at end-June 2021 has been
reversed. Both Europe and the Americas are now roughly in line with the rest of the world, which
on average reports an NSFR of 123.8%.

Basel III Monitoring Report February 2023 13

Detailed results of the Basel III monitoring exercise as of
30 June 2022

1. General remarks

At its 12 September 2010 meeting, the Group of Governors and Heads of Supervision (GHOS), the
oversight body of the Basel Committee on Banking Supervision, announced a substantial strengthening
of existing capital requirements and fully endorsed the agreements it had reached on 26 July 2010. 1 These
capital reforms, together with the introduction of two international liquidity standards, are collectively
referred to as “initial phase of Basel III reforms” or in short “initial Basel III” within this report. On
7 December 2017, the GHOS finalised the Basel III reforms 2 with a number of revisions that seek to restore
credibility in the calculation of risk-weighted assets (RWA) and capital ratios of banks (referred to as
“final Basel III” in this report). The Committee monitors and evaluates the impact of these capital, leverage
and liquidity requirements on a semiannual basis. 3 This report summarises the results of the latest Basel III
monitoring exercise using data as of 30 June 2022. 4 It includes a special feature on regional distribution of
the Group 1 and Group 2 banks and their impact on results in the Basel III monitoring reports. The
Committee believes that the information contained in the report will provide relevant stakeholders with a
useful benchmark for analysis.
Since the report published in September 2021, the monitoring reports no longer include a
statistical annex. However, the data underlying the graphs are available for download as a separate Excel
file. This presents the same data as the Annex in previous reports but in a format that is easier to use for
readers’ own analyses. Furthermore, some analyses that were previously presented in the leverage ratio,
liquidity and credit risk sections of the report have been published as Tableau dashboards instead.
Additional analyses presented in the report will be made available in this innovative format in the coming
months. The Committee welcomes any feedback on these new formats at [email protected].

1
See the 26 July 2010 press release “The Group of Governors and Heads of Supervision reach broad agreement on Basel
Committee capital and liquidity reform package”, www.bis.org/press/p100726.htm, and the 12 September 2010 press release
“Group of Governors and Heads of Supervision announces higher global minimum capital standards”, www.bis.org/press/
p100912.htm.
2
Basel Committee on Banking Supervision, High-level summary of Basel III reforms, December 2017, www.bis.org/bcbs/publ/
d424_hlsummary.pdf; Basel Committee on Banking Supervision, Basel III: Finalising post-crisis reforms, December 2017,
www.bis.org/bcbs/publ/d424.htm.
3
A list of previous publications is included in the Annex.
4
The data for Japan are as of the end of March 2022, as banks in that country report on a biannual basis as of the end of March
and the end of September to correspond to the fiscal year-end period. Further, the data for Canada reflect a reporting date of
30 April 2022, which corresponds to Canadian banks’ year-end.

Basel III Monitoring Report February 2023 15

1.1 Scope of the monitoring exercise

Almost all Committee member countries participated in the Basel III monitoring exercise as of 30 June
2022. The estimates presented are based on data submitted by the participating banks and their national
supervisors in reporting questionnaires and in accordance with the instructions prepared by the
Committee. 5 The questionnaire covered components of eligible capital, the calculation of all aspects of
RWA, the calculation of a leverage ratio and components of the liquidity metrics. Table A.3 in Annex A
shows which standards are relevant for the relevant Basel III regime (initial Basel III, transitional Basel III
and the fully phased-in Basel III framework). Technically, the remaining difference between the transitional
and the fully phased-in Basel III frameworks is the level of the output floor which is 50% in 2023
(transitional final Basel III framework) and 72.5% in 2028 (fully phased-in final Basel III framework). This
report reflects the finalisation of the market risk framework published in January 2019. 6
The final data were submitted to the Secretariat of the Committee by 18 January 2023. The
purpose of the exercise is to provide the Committee and the public with an ongoing assessment of the
impact on participating banks of the capital and liquidity standards set out in the Basel standards.
The Committee appreciates the significant efforts contributed by both banks and national
supervisors to this ongoing data collection exercise.

1.2 Sample of participating banks

Data on the initial Basel III framework were included for 182 banks, including 115 Group 1 banks and 66
Group 2 banks. 7 Group 1 banks are those that have Tier 1 capital of more than €3 billion and are
internationally active. All other banks are considered Group 2 banks. Compared with end-December 2021
with 117 Group 1, 65 Group 2 banks and 182 banks overall, the sample decreased by four banks for
Group 1 and increased by two banks for Group 2; in addition, one former Group 2 bank was reclassified
as Group 1. However, while data availability from supervisory reporting was rather stable, the number of
banks providing data on the final Basel III framework declined significantly. Therefore, the impact of the
final Basel III framework could only be assessed for a sample of 126 banks, among which 86 Group 1 banks
and 40 Group 2 banks, which is a decrease by eight Group 1 banks and 17 Group 2 banks compared with
the previous report. 8
Banks were asked to provide data at the consolidated level as of 30 June 2022. Subsidiaries are
not included in the analyses to avoid double-counting. For Group 1 banks, members’ coverage of their
banking sector was very high, reaching 100% coverage for some countries. Coverage for Group 2 banks
was lower and varied across countries.
For a number of banks data relating to some parts of the Basel III framework were unavailable.
Accordingly, these banks are excluded from individual sections of the Basel III monitoring analysis due to
incomplete data. In certain sections, data are based on a balanced data set. This data set represents only
those banks that reported necessary data at the June 2011 (labelled “H1 2011”) through June 2022
(“H1 2022”) reporting dates, to make more meaningful period-to-period comparisons. The balanced data
set differs for the various analyses; typically, it includes around 82 Group 1 banks, of which 27 are G-SIBs,

5
See Basel Committee on Banking Supervision, Instructions for Basel III monitoring, January 2021, www.bis.org/bcbs/qis/.
6
Basel Committee on Banking Supervision, Minimum capital requirements for market risk, January 2019 (rev February 2019),
www.bis.org/bcbs/publ/d457.htm.
7
See Table B.1 in the Statistical Annex for details on the sample. Also note that this table shows banks for which data were
generally included for the specific topics, but not necessarily sufficiently complete to be used in all analyses.
8
See Table B.3 in the Statistical Annex for details on the sample for the assessment of the final Basel III framework. Also note
that while all these banks provided data on the final Basel III credit and operational risk standards, some of them were unable
to provide data on some other aspects of the final framework. To that extent, it was assumed that capital requirements would
remain unchanged compared with the initial Basel III framework.

16 Basel III Monitoring Report February 2023

and around 20 Group 2 banks. The G-SIBs in the time series analyses are among those banks that have
been classified as G-SIBs as of November 2022, irrespective of whether they have also been classified as
G-SIBs previously.
This report shows some of the results for three regional groupings – Europe, the Americas and
the rest of the world. Table B.1 in the Statistical Annex provides detail on the composition of these country
groupings. Table B.2 provides some additional sample statistics for the banks included in the exercise at
the reporting date both overall and by region for Group 1 banks.
For a balanced data set of Group 1 banks participating in this exercise, Graph 12 shows the share
of the three regions distinguished in this report in three key indicators: Tier 1 capital, risk-weighted assets
and accounting total assets, using exchange rates as at the current reporting date. Since end-June 2011,
the share of the Americas in Tier 1 capital has declined by 6.6 percentage points to 19.3%, while the share
in RWA decreased by 8.6 percentage points to 20.7%. The Americas’ share in accounting total assets
decreased slightly from 18.7% to 18.3%. The share of European banks decreased by 8.7 percentage points
to 26.9% in terms of Tier 1 capital, by 16.3 percentage points to 24.2% in terms of RWA and by 15.1
percentage points to 34.8% in terms of accounting total assets. Conversely, the share of banks in the rest
of the world increased by 15.3 percentage points to 53.8% in terms of Tier 1 capital, by 24.9 percentage
points to 55.1% in terms of RWA and by 15.5 percentage points to 46.9% in terms of accounting total
assets.

Regional share of Tier 1 capital, total RWA and accounting total assets over time
Fully phased-in initial Basel III standards1, Group 1 banks, balanced data set,
exchange rates as of the current reporting date Graph 12

Tier 1 capital1 Risk-weighted assets1 Accounting total assets

Per cent Per cent Per cent

100 100 100

80 80 80

60 60 60

40 40 40

20 20 20

0 0 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Europe Americas Rest of the world

1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

1.3 Methodology

1.3.1 Aggregation
Reported average amounts in this report have been calculated by creating a composite bank at a total
sample level, which effectively means that the total sample averages are weighted. For example, the
average common equity Tier 1 capital ratio is the sum of all banks’ common equity Tier 1 (CET1) capital
for the total sample divided by the sum of all banks’ RWA for the total sample. Similarly, the average fully

Basel III Monitoring Report February 2023 17

phased-in Basel III Tier 1 leverage ratio is the sum of all banks’ fully phased-in Tier 1 capital for the total
sample divided by the sum of all banks’ Basel III leverage ratio exposures for the total sample.

1.3.2 Impact metrics

Throughout the report, effects of the reforms are frequently shown in terms of: (i) changes in minimum
required capital (MRC); (ii) impact on capital ratios; and (iii) estimated capital shortfalls. MRC and shortfalls
can be computed based on banks’ minimum and target requirement levels. While the minimum levels
reflect a risk-based 4.5% CET1, a 6% Tier 1 and an 8% total capital requirement as well as a 3% requirement
for the Basel III leverage ratio, the target level also accounts for the capital conservation buffer (ie resulting
in a 7% CET1, an 8.5% Tier 1 and a 10.5% total capital requirement), as well as any applicable G-SIB
surcharge. Under the final Basel III framework, the target capital requirements also include the G-SIB buffer
on the leverage ratio. Consistent with previous reports, this report does not reflect any additional capital
requirements under Pillar 2 of the Basel framework, any higher loss absorbency requirements for domestic
systemically important banks, nor does it reflect any countercyclical capital buffer requirements. However,
it reflects any additional Pillar 1 RWA as reported by banks and their supervisors.

Reference points
Unless otherwise noted, the assessment of the final Basel III framework compares the fully phased-in final
Basel III framework with the fully phased-in initial Basel III framework as implemented by the national
supervisor.

Minimum required capital

Because the suite of post-crisis reforms includes revisions to RWA, expected loss (EL) amounts and the
Basel III leverage ratio framework, the analysis of the final Basel III framework mainly focuses on MRC as a
broad and integrated capital impact measure to aggregate the results. At the bank level, MRC is defined
in this report as the sum of:

• the relevant target capital ratio level based on the Basel requirements times RWA, after
consideration of all relevant floors;
• any capital effects from the treatment of EL amounts for credit risk and provisions at the relevant
tier of capital, taking into account the split between defaulted and non-defaulted assets for those
jurisdictions that require such a split;
• any capital effects from deductions which are an alternative to a 1,250% risk weighting treatment
in certain national implementations of the Basel framework; and
• any incremental capital requirement (over and above the risk-based requirements including any
floors) resulting from the Basel III leverage ratio.
This calculation is conducted for both the current basis and the revised regimes. Changes in MRC
are hence calculated as follows:

MRC − MRCbasis
%∆MRC = revised .
MRCbasis

Therefore, this formula reflects, among other elements:

• changes to the calculation of RWA (at the portfolio or risk type level RWA before output floors);
• changes to capital resulting from changes in the calculation of EL amounts for credit risk and the
treatment of provisions;

18 Basel III Monitoring Report February 2023

• changes resulting from the move from the national implementation of the transitional Basel I-
based floor (as collected through supervisory reported systems) to the aggregate output floor
under the final Basel III framework; and
• changes to the definition of the Basel III leverage ratio exposure measure for all banks and to its
level for G-SIBs (see below for the treatment of Covid-19-related exclusions).

Capital ratios
The impact of the reforms is also expressed in terms of its impact on capital ratios reflecting changes due
to the reforms in both the numerator (through any effects on the treatment of EL amounts and provisions)
and the denominator (through changes in RWA).

Leverage ratio
Temporary exclusions from the leverage ratio exposure measure in the context of Covid-19 have been
added back to both the current and the fully phased-in leverage ratio exposure measures for the
calculation of changes in MRC from the final Basel III framework. This separates the impact of the
implementation of the final framework from the impact of the exclusions expiring. The exclusions have
also been added back for the analysis of the combined shortfalls in Section 2.4 and for the analysis of the
interactions between the regulatory measures in Section 5.2. The standalone analysis of the leverage ratio
in Section 2.3 consistently reflects exclusions as applicable at the reporting date.

Combined shortfall analysis

In addition, a combined shortfall analysis at the three tiers of the Basel III capital ratios is conducted at the
target level. The combined net shortfall at any capital tier is calculated as the difference (where positive)
between the total required capital (accounting for both the risk-based requirements and the Basel III
leverage ratio) at a given capital tier and the actual capital of the same tier held, net of any shortfall
stemming from higher capital tiers. The last term is included since any higher tier capital (eg CET1) raised
to meet a specific higher tier capital shortfall (eg CET1 shortfall) can also be used to meet any possible
specific shortfall of a lower tier capital (eg any additional Tier 1 shortfall caused by risk-based and/or
Basel III leverage ratio Tier 1 capital requirements).

1.3.3 Presentation
To preserve confidentiality, some of the results shown in this report are presented using box plot charts.
The median value is represented by a horizontal line, with 50% of the values falling in the 25th to 75th
percentile range shown by the box. The upper and lower end points of the thin vertical lines generally
show the range of the entire sample; in some cases, arrows at the top of the vertical line indicate banks
with changes outside the range shown in the graph. Finally, weighted averages are represented by dots.
Since most of the transitional arrangements for the initial Basel III framework expired at the end
of 2018 (see Box A), this report no longer distinguishes the transitional and fully phased-in initial Basel III
framework in the body of the text. Rather, relevant time series show the fully phased-in initial Basel III
framework for the data points up to and including the end of 2018 and the actual framework in place at
the reporting date for all data points thereafter. Interested readers will find a selection of tables showing
time series for the transitional initial Basel III framework in the Excel files accompanying this report; these
are in line with the presentation in previous reports. Furthermore, to the extent data are available, all data
for the initial Basel III framework consistently reflect the impact of the output floor in the Basel II framework
and any national floors in place.

1.3.4 Time series analysis and comparisons

To provide additional operational capacity for banks and supervisors to respond to the immediate financial
stability priorities resulting from the impact of Covid-19, the Committee decided not to collect Basel III

Basel III Monitoring Report February 2023 19

monitoring data for the end-June 2020 reporting date. Therefore, only data from supervisory reporting
were collected. Graphs and tables that fully or partially use data from the monitoring exercise use banks’
end-December 2019 data points also for the end-June 2020 reporting date. Where this is the case, it is
mentioned in a footnote. Such graphs show no change between end-December 2019 and end-June 2020,
and the change for the full year 2020 is shown between the end-June 2020 and end-December 2020 data
points.

Box A

Phase-in provisions for risk-based capital requirements

The initial Basel III framework includes the following phase-in provisions for capital ratios:
• Regulatory adjustments (ie possibly stricter sets of deductions that apply under Basel III) were fully phased
in by 1 January 2018;
• Capital instruments that no longer qualify as non-common equity Tier 1 or Tier 2 capital are phased out
beginning 1 January 2013. Fixing the base at the nominal amount of such instruments outstanding on
1 January 2013, their recognition is capped at 90% from 1 January 2013, with the cap reducing by 10
percentage points in each subsequent year;
• An additional 2.5% capital conservation buffer above the regulatory minimum capital ratios, which must be
met with CET1 capital, was phased in by 1 January 2019; and
• The additional loss absorbency requirement for G-SIBs, which ranges from 1.0% to 2.5%, was fully phased
in by 1 January 2019. It is applied as an extension of the capital conservation buffer and must be met with
CET1.
The final Basel III framework as amended by the 27 March 2020 press release includes phase-in provisions
for the output floor, which will start at 50% on 1 January 2023, rise in annual steps of 5% and be fully phased-
in at the 72.5% level from 1 January 2028. Furthermore, the increase in RWA can be capped at 25% during the
phase-in period at national discretion.
Table A.4 in Annex A includes a detailed overview of the Basel Committee’s phase-in arrangements.

1.4 Data quality

For this monitoring exercise, participating banks submitted comprehensive and detailed non-public data
on a voluntary and best-efforts basis. On jurisdictional level, there may be mandatory data collections
ongoing which also feed into this report. As with the previous studies, national supervisors worked
extensively with banks to ensure data quality, completeness and consistency with the published reporting
instructions. In addition, particular attention has been paid on the reconciliation of reported data with
existing data from supervisory reporting systems. Banks are included in the various analyses below only
to the extent that they were able to provide data of sufficient quality to complete the analyses.

1.5 Interpretation of results

The following caveats apply to the interpretation of results shown in this report:

• When comparing results to prior reports, sample differences as well as minor revisions to data
from previous periods need to be taken into account. Sample differences also explain why results
presented for the December 2021 reporting date may differ from the H2 2021 data point in
graphs and tables showing the time series for the balanced data set as described above.
• The actual impact of those new requirements that are covered in this analysis will almost certainly
be less than shown in this report given banks’ difficulty to assess the exact impact of the

20 Basel III Monitoring Report February 2023

 framework before its full implementation and interim adjustments made by the banking sector
to changing economic conditions and the regulatory environment. Banks may use
approximations when the implementation of an accurate impact assessment would be too costly.
For example, the results do not consider bank profitability, changes in capital or portfolio
composition or other management responses to the policy changes since 30 June 2022 or in the
future. For this reason, the 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 approximations where information is not publicly available.
• Except for the results for the initial Basel III framework, the Basel III capital amounts shown in this
report assume that all non-qualifying capital instruments are fully phased out (ie it is assumed
that none of these capital instruments will be replaced by eligible instruments). As such, these
amounts underestimate the amount of Tier 1 capital and Tier 2 capital held by a bank in some
countries, as they do not give any recognition for non-qualifying instruments that may actually
be phased out after the Committee’s 1 January 2022 deadline. The treatment of non-qualifying
capital instruments also affects figures reported in the section on the Basel III leverage ratio.
• For banks that could not provide data on the impact of the revised standards for securitisation,
CVA or market risk, it was assumed that the respective capital requirements would remain
unchanged in the assessment of the overall impact. Such banks were however excluded from the
analysis of the relevant policy topic.
• Given the output floor of the final Basel III framework only applies to overall capital requirements,
it is not applied to individual risk types or asset classes in this report. To this extent, the results
are not comparable to analyses in other reports, which may apply the output floor at more
granular levels than required by the final Basel III framework.
• This report disregards any effects stemming from the upcoming changes in accounting
frameworks that may influence capital requirements and eligible capital.
• Several G-SIBs report conservative assumptions under the revised market risk framework. 9
Therefore, the results for market risk since the end-2020 reporting date only reflect 20% 10 of the
contribution from equity investments in funds subject to the “other sector bucket” treatment,
while all other changes from the revised market risk framework are included in the calculations
as reported. This also impacts the results of several G-SIBs in particular and also of a number of
other banks, albeit to a significantly smaller extent. Please refer to the previous reports for the
treatment in previous reporting dates.
• Some capital requirements, such as D-SIB buffer and Pillar 2 requirements, are not considered in
the analysis. This tends to give more importance to leverage ratio requirements relative to risk-
based requirements, compared with the actual situation where those additional requirements
would be considered.

9
Specifically, the banks are treating all trading book positions in equity investment in funds that may no longer be allowed to
be modelled, using the most conservative standardised approach, ie the “other bucket” treatment subject to the highest
applicable risk weights. They assumed that they are unable to use other treatments such as the index treatment or the mandate-
based approach as set out in MAR21.36.
10
This assumption is based on moving some equity investments in funds subject to the “other sector bucket” treatment to the
“look-through” treatment, which would result in lower delta, vega and curvature requirements and higher diversification
benefits.

Basel III Monitoring Report February 2023 21

2. Regulatory capital requirements and TLAC

Table 2 shows the aggregate capital ratios under the current (or transitional initial), transitional final and
fully phased-in final Basel III frameworks, as well as the related capital shortfalls. Table 3 shows CET1 capital
ratios by regions. Details of capital ratios and capital shortfalls are provided in Section 2.1 and Section 2.4.

Aggregate capital ratios and (incremental) combined capital shortfalls at the

target level1 Table 2

Basel III capital ratios, Combined risk-based capital and leverage ratio
in per cent shortfalls at the target level,
in billions of euros2
Initial Final Initial Final
Current Transitional Fully phased-in Current Transitional Fully phased-
in
Group 1 banks
CET1 capital 12.7 13.0 12.5 0.0 0.0 3.5
Tier 1 capital 3
14.4 14.7 14.2 0.0 0.0 1.9
Total capital 4
16.9 17.2 16.6 0.0 0.0 2.4
Sum 0.0 0.0 7.8
Of which: G-SIBs
CET1 capital 12.6 12.9 12.5 0.0 0.0 3.5
Tier 1 capital 3
14.3 14.7 14.2 0.0 0.0 1.9
Total capital 4
17.0 17.4 16.8 0.0 0.0 2.4
Sum 0.0 0.0 7.8
Group 2 banks
CET1 capital 17.1 15.3 14.5 0.0 0.0 0.0
Tier 1 capital3 18.1 16.3 15.4 0.0 0.0 0.0
Total capital4 20.3 18.3 17.3 0.0 0.0 0.0
Sum 0.0 0.0 0.0
1
The target level includes the capital conservation buffer and the capital surcharges for 30 G-SIBs as applicable but does not include any
countercyclical capital buffers. Samples for the initial and final Basel III frameworks are not consistent. 2 The shortfall is calculated as the
sum across individual banks where a shortfall is observed. The calculation includes all changes to RWA (eg definition of capital,
counterparty credit risk, trading book and securitisation in the banking book). The Tier 1 and total capital shortfalls are incremental
assuming that the higher-tier capital requirements are fully met. All columns use the 2017 definition of the leverage ratio exposure
measure. 3 The shortfalls presented in the Tier 1 capital row are additional Tier 1 capital shortfalls. 4 The shortfalls presented in the
total capital row are Tier 2 capital shortfalls.

Source: Basel Committee on Banking Supervision.

22 Basel III Monitoring Report February 2023

 CET1 capital ratios
In per cent Table 3

Initial Basel III standards Final Basel III standards

Number of banks Current Number of banks Transitional Fully phased-in
Group 1 banks 114 12.7 90 13.0 12.5
Of which: Europe 39 14.3 30 12.5 11.7
Of which: Americas 23 11.8 21 12.1 11.8
Of which: RW 52 12.5 39 13.8 13.4
Of which: G-SIBs 30 12.6 30 12.9 12.5
Group 2 banks 65 16.9 38 15.3 14.5
Source: Basel Committee on Banking Supervision.

2.1 Risk-based capital ratios

2.1.1 Initial Basel III standards

When observing initial Basel III capital ratios, Group 1 banks show less dispersion compared with the
previous reporting date, whereas Group 2 banks continue to show quite significant dispersion across
banks as shown in Graph 13.
For Group 1 banks, the initial Basel III CET1 capital ratio ranges between 9.2% and 24.2%. The
range is roughly the same for initial Basel III Tier 1 and total capital ratios, even though lower and upper
bounds are slightly higher. Only considering the participating G-SIBs, the range is even lower with less
than 8 percentage points. The lowest initial Basel III CET1 capital ratio amounts to 10.0%, while the highest
reported initial Basel III CET1 capital ratio amounts to 17.5%.
In contrast, Group 2 banks continue to show particularly high dispersion. The initial Basel III CET1
capital ratio ranges between 11.3% and 41.2%. For initial Basel III Tier 1 and total capital ratios the range
is even higher, nearly amounting to 50 percentage points, because the highest reported capital ratio is as
high as about 60%.
Apart from that, nearly 95% of Group 1 banks report initial Basel III CET1 capital ratios above 10%.
More than half of them even exceed the 13% mark. For Group 2 banks, all participants report initial Basel III
CET1 capital ratios above 10%, nearly 85% even show capital ratios above 13%.

Basel III Monitoring Report February 2023 23

Initial Basel III CET1, Tier 1 and total capital ratios1 Graph 13

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent
^
50 50 50

40 40 40

30 30 30

20 20 20

10 10 10

0 0 0
CET 1 Tier 1 Total CET 1 Tier 1 Total CET 1 Tier 1 Total
1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet “Graph 13a” provides
related information for the fully phased-in initial Basel III capital ratios.

In recent years, Group 1 banks, as well as G-SIBs, showed a drop in capital ratios in the first half
of each year. In the second half, the capital ratios used to rise again. Usually, the decline in the first half of
each year was less pronounced than the increase in the second half. Consequently, there was still an
upwards trend observable for these years. Nevertheless, for H1 2022, the decline is steeper than in the
previous years. For Group 1 banks and G-SIBs, the CET1 capital ratios decreased from 13.3% in H2 2021 to
12.7% in H1 2022 and from 13.1% in H2 2021 to 12.6% in H1 2022, respectively. Considering the current
macroprudential situation banks face, this is in line with expectations. Group 2 banks show an even more
pronounced decline in capital ratios: Compared with H2 2021, the CET1 capital ratio dropped by 1.1
percentage points to 14.9%.

Initial Basel III CET1, Tier 1 and total capital ratios1

Balanced data set Graph 14

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

20 20
15

15 15
10
10 10

5
5 5

0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

CET 1 Tier 1 Total

The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Note that the Excel file shows
Tier 1 and total capital ratios as increments over the next lower Tier of capital.

24 Basel III Monitoring Report February 2023

 In 2011, initial Tier 1 capital ratios were more than two percentage points lower in the Americas
and in Europe than in the rest of the world region (Graph 15). However, for European banks and banks in
the Americas the capital ratios rose remarkably stronger than in the rest of the world. Consequently, the
original relationship reversed around 2014, when these banks started reporting higher average capital
ratios than banks in the rest of the world. In 2017, capital ratios in the Americas started to decrease again,
thus moving into line with the capital ratios in the rest of the world. Since then, the average initial Tier 1
capital ratio in the Americas is similar to the one in the rest of the world.
Over H1 2022, capital ratios showed comparable developments across all regions. All capital
ratios decreased during the first half of 2022. European banks report the most pronounced decrease.

Initial Basel III CET1, Tier 1 and total capital ratios,1 by region
Group 1 banks, balanced data set Graph 15

CET1 Tier 1 Total

Per cent Per cent Per cent

20 20 20

17.5 17.5 17.5

15 15 15

12.5 12.5 12.5

10 10 10

7.5 7.5 7.5

5 5 5
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Europe Americas Rest of the world
1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet “Graph 15a” provides
the same breakdown for G-SIBs.

Across all regions and groups, the decrease in capital ratios is due to increasing RWA during the
first half of 2022. For European Group 1 banks, the RWA increase of 4.1% is accompanied by a reduction
in Tier 1 capital of 2.7%. This is the reason for the sharper decline in capital ratios for European banks
compared with American banks and banks in the rest of the world. The RWA increase is particularly high
for Group 2 banks (+5.9%), thus explaining the comparably high reduction in capital ratios.

Basel III Monitoring Report February 2023 25

Initial Basel III Tier 1 capital ratios and changes in RWA and Tier 1 capital1
Balanced data set, exchange rates as of the current reporting date Graph 16

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

20 20 20

15 15 15

10 10 10

5 5 5

0 0 0

−5 −5 −5

−10 −10 −10

−15 −15 −15

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Tier 1 capital ratio Change in Tier 1 capital Change in RWA
1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Initial Basel III Tier 1 capital ratios and changes in RWA and Tier 1 capital,1
by region
Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 17

Europe Americas Rest of the world

Per cent Per cent Per cent

20 20 20

15 15 15

10 10 10

5 5 5

0 0 0

−5 −5 −5

−10 −10 −10

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Tier 1 capital ratio Change in Tier 1 capital Change in RWA

1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 18 and Graph 19 below show the evolution of initial Basel III CET1 capital ratios and their
drivers. Starting with the June 2011 CET1 capital ratio, the cumulative effect on the ratio of CET1 capital
raised, retained earnings and other increases in CET1 capital (such as any reduction in regulatory
adjustments) is added to the capital ratio. Furthermore, the impact of cumulative reductions in RWA has a

26 Basel III Monitoring Report February 2023

positive impact on capital ratios, while the impact of cumulative increases in RWA is subtracted from the
baseline capital ratio.
Overall, Graph 18 suggests that retained earnings were the by far most significant contributor to
the improvements in CET1 capital ratios since 2011. A more detailed observation shows that the
development and the main contributors are very heterogeneous across regions. Indeed, in Europe, the
improvement of CET1 capital ratios stems mainly from a reduction in total RWA, whereas in the Americas,
the main driver of strengthening the CET1 ratio is the category “Other changes to CET1”. In both regions,
the cumulative impact of the individual main contributor decreased during H1 2022. In contrast, in the rest
of the world the different contributors to the CET1 capital ratio development counteract. While the
negative cumulative impact of RWA continues to increase, the positive cumulative impact of retained
earnings rose as well. This development was completely offset by a decline in the cumulative impact of
“Other changes to CET1”.

Evolution of initial Basel III CET1 capital ratios and their drivers1
Group 1 banks, balanced data set2 Graph 18

Per cent

15

10

−5
H2 2009

H1 2011

H2 2011

H1 2012

H2 2012

H1 2013

H2 2013

H1 2014

H2 2014

H1 2015

H2 2015

H1 2016

H2 2016

H1 2017

H2 2017

H1 2018

H2 2018

H1 2019

H2 2019

H1 2020

H2 2020

H1 2021

H2 2021

H1 2022
Overall CET1 capital ratio Retained earnings (cumulative contribution since 2011)
2009 CET1 capital ratio Risk-weighted assets (cumulative contribution since 2011)
2011 CET1 capital ratio CET1 raised (cumulative contribution since 2011)
Other changes to CET13 (cumulative contribution since 2011)
1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter. 2 Except the ratio for H2 2009, which is based on the different sample
of the Committee’s comprehensive Quantitative Impact Study and therefore not fully comparable. 3 Other changes include changes in
regulatory adjustments to CET1 capital and any other changes in CET1 capital between two reporting dates that are not reported separately.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Basel III Monitoring Report February 2023 27

Evolution of initial Basel III CET1 capital ratios and their drivers,1 by region
Group 1 banks, balanced data set2 Graph 19

Europe Americas Rest of the world

Per cent Per cent Per cent
25 25 25
20 20 20
15 15 15
10 10 10
5 5 5
0 0 0
−5 −5 −5
−10 −10 −10
−15 −15 −15
H1 2011
H1 2012
H1 2013
H1 2014
H1 2015
H1 2016
H1 2017
H1 2018
H1 2019
H1 2020
H1 2021
H1 2022

H1 2011
H1 2012
H1 2013
H1 2014
H1 2015
H1 2016
H1 2017
H1 2018
H1 2019
H1 2020
H1 2021
H1 2022

H1 2011
H1 2012
H1 2013
H1 2014
H1 2015
H1 2016
H1 2017
H1 2018
H1 2019
H1 2020
H1 2021
H1 2022
2009 CET1 capital ratio Retained earnings (cum. CET1 raised (cum.
2011 CET1 capital ratio contribution since 2011) contribution since 2011)
Overall CET1 capital ratio Risk-weighted assets (cum. Other changes to CET13
contribution since 2011) (cum. contribution since 2011)
1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter. 2 Except the ratio for H2 2009, which is based on the different sample
of the Committee’s comprehensive Quantitative Impact Study and therefore not fully comparable. 3 Other changes include changes in
regulatory adjustments to CET1 capital and any other changes in CET1 capital between two reporting dates that are not reported separately.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

2.1.2 Final Basel III standards

On average, the initial Basel III CET1 capital ratio of Group 1 banks (Graph 13) compared with the fully
phased-in final Basel III CET1 capital ratio (Graph 20) would decline by about 20 basis points from 12.7%
to 12.5%. The difference for G-SIBs is similar, with the CET1 ratio dropping by 10 basis points from 12.6%
to 12.5%. Apart from that, Group 2 banks show a larger CET1 capital ratio decline by 240 basis points from
16.9% to 14.5%.
Similar to CET1 capital ratios, Tier 1 and total capital ratios would also decline for all groups. For
Group 1 banks and G-SIBs, the decline in Tier 1 capital ratio is similar to the decline in CET1 capital ratio.
Both groups show a slightly more pronounced decline in total capital ratio of around 20 basis points.
Group 2 banks continue to show a larger impact due to the fully phased-in final Basel III framework. The
Tier 1 capital ratio reduces by 330 basis points, while the total capital ratio even reduces by 350 basis
points.
All Group 1 banks in the sample meet the 4.5% CET1 minimum ratio as well as the 7.0% target
ratio under fully phased-in final Basel III standards. Moreover, 44% of Group 1 banks report a CET1 ratio
higher than 13% and roughly 90% have a CET1 ratio amounting to more than 10%. Nevertheless, one
Group 1 bank does not meet the target total capital ratio of 10.5%. For Group 2 banks, all banks meet the
minimum and target fully phased-in capital requirements under the final Basel III framework. The vast
majority (over 90%) of Group 2 banks has a CET1 capital ratio that is higher than 10%. Almost two thirds
even exceed the 13% mark. 11

11
Worksheet “Graph 20a” in the Excel data file provides additional information.

28 Basel III Monitoring Report February 2023

Fully phased-in CET1, Tier 1 and total capital ratios under the final Basel III
standards1 Graph 20

CET1 capital Tier 1 capital Total capital

Per cent Per cent Per cent
^ ^ ^
25 25 25

20 20 20

15 15 15

10 10 10

5 5 5

0 0 0
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks

1
See Section 1.3.3 for details on box plots. The solid horizontal line represents the relevant minimum requirement and the dotted horizontal
line represents the relevant target (excluding any bank-specific G-SIB surcharges).

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. The worksheet “Graph 20b”
provides the same information for the transitional final Basel III standards.

2.2 Impact of the final Basel III framework on minimum required capital

On average, Group 1 banks report a total change in Tier 1 MRC at the target level due to the final Basel III
framework of +2.8%. The average Tier 1 MRC change for G-SIBs is slightly higher (+3.2%). Compared with
that, Group 2 banks show an overall decrease in Tier 1 MRC with -2.0% (see Table 4). In contrast to the
results of the cumulative Quantitative Impact Study (CQIS), 12 these numbers include the impact of the
amended minimum capital requirements for market risk published in January 2019 and the targeted
revisions to the CVA framework in July 2020.
In more detail, Graph 21 depicts the dispersion of the MRC changes across Group 1 banks, G-
SIBs and Group 2 banks in the sample. The change in MRC (including market risk and CVA) for the current
period ranges between -1.5% and 10.9% for half of the Group 1 banks with a median of 2.2%. The
distribution for G-SIBs is shifted towards a much higher median impact on MRC of 16.5% and a wider
interval from -2.2% and 19.3%. Meanwhile for this exercise, half of Group 2 banks report a negative
increase the median being -0.0% with an interval ranging from -6.6% to 1.3%.
For Group 2 banks, we notice two important changes in the recent period. One being a noticeable
spike in the upper bound and in dispersion in June 2021 reflecting improvements in data reporting quality
and leverage ratio exemptions accounting approach. 13 The other being a significant drop in Group 2

12
In the cumulative QIS, all changes from the revised market risk framework were are already added to MRC under the current
rules such that they were not reflected in the change in MRC.
13
The surge in the upper bound and dispersion is mostly due to the capital requirements reporting of one Group 2 bank that
correctly reflected in June 2021 the leverage ratio exposures measurement treatment aligned with its specific business model
and legal status under the current framework. Due to the methodological approach in the calculation of the change in MRC
taking into account the interactions between leverage ratio and risk-based requirements, the changes in leverage ratio
requirements are no longer compensating the increase in the risk-based change in MRC. At the same time, the level of MRC of
this bank under the final framework remains unaffected by this change.

Basel III Monitoring Report February 2023 29

overall impact and dispersion towards the negative reflecting a change in the Group 2 banks sample 14 for
the June 2022 exercise.

Total change in Tier 1 MRC at the target level1,2

Unbalanced data set Graph 21

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent of overall base MRC Per cent of overall base MRC Per cent of overall base MRC
^ ^
60 60 120

40 40 80

20 20 40

0 0 0

−20 −20 −40

−40 −40 −80

CQIS2

H1 20203
CQIS2

H1 20203

CQIS2

H1 20203
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019

H2 2020
H1 2021
H2 2021
H1 2022
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019

H2 2020
H1 2021
H2 2021
H1 2022

H2 2017
H1 2018
H2 2018
H1 2019
H2 2019

H2 2020
H1 2021
H2 2021
H1 2022
H2 2015
H2 2015

H2 2015
1
See Section 1.3.3 for details on box plots. 2 Results for H2 2015 are based on the Committee’s cumulative Quantitative Impact Study and
are not fully comparable from a methodological point of view, in particular since all changes from the revised market risk framework were
already added to MRC under the current rules such that they were not reflected in the change in MRC. 3 Since the Committee did not
collect the relevant data through its Basel III monitoring exercise for the end-June 2020 reporting date, results for H1 2020 use data from
banks as of end-2019 and supervisory data for June 2020. Consequently, the change in MRC for the various risk types is kept constant from
end-2019 to June 2020, but the basis on which these changes are calculated is updated for end-June 2020 based on supervisory data.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

The results are summarised in Table 4 and Graph 22 that include the following columns that
provide an additional breakdown of the total change in MRC:
• Total shows overall changes in Tier 1 MRC, including the risk-based requirements (ie including
output floors) and the Basel III leverage ratio.
• Total: risk-based capital requirements shows changes to the risk-based Tier 1 MRC (ie excluding
the Basel III leverage ratio).
• Credit risk shows the change in Tier 1 MRC due to the revisions to the standardised and internal
ratings-based (IRB) approaches for credit risk, 15 including the effect from migration of
approaches 16 and changes to the securitisation framework.
• CVA shows the change in Tier 1 MRC due to the revisions to the CVA framework. 17

14
Please refer to the special feature on regional distributions of Group 1 and Group 2 banks and their impact on results in the
Basel III monitoring reports on page at the end of this report.
15
The credit risk MRC impact since the end-December 2019 reporting date reflects the split between defaulted and non-defaulted
assets in the treatment of EL amounts and provisions for those jurisdictions that require such a split. As a consequence of this
methodological change banks in these jurisdictions may show slightly increased credit risk MRC impacts. This is most
pronounced for banks in the European regional breakdown since European Union rules require the aforementioned split.
16
Migration of approaches refers to the application of a different approach for determining risk weights than the one currently
used, as a consequence of the revisions which remove certain modelling approaches for selected (sub-)asset classes.
17
Targeted revisions to the revised CVA framework were published in July 2020. See Basel Committee on Banking Supervision,
Targeted revisions to the credit valuation adjustment risk framework, July 2020, www.bis.org/bcbs/publ/d507.htm.

30 Basel III Monitoring Report February 2023

• Market risk shows the change in Tier 1 MRC due to the revisions to the market risk framework.
• Operational risk shows the change in Tier 1 MRC due to the revisions to the operational risk
standards.
• Output floor presents the change in the level of Tier 1 MRC due to the aggregate output floor
when the total RWA fall below the threshold level of 72.5%. The impact is measured relative to
the current national implementation of the Basel I-based transitional floor set out in the Basel II
framework, as reported by member countries.
• Other Pillar 1 presents the change in Tier 1 MRC due to changes to Pillar 1 requirements not
specifically captured in the reporting template, including requirements by individual jurisdictions
which are not based on a Basel Committee standard.
• Leverage ratio shows the change in Tier 1 MRC resulting from the changes to the Basel III leverage
ratio framework. This captures the change in the definition of the Basel III leverage ratio exposure
measure and the introduction of a G-SIB buffer on top of a 3% leverage ratio minimum which
amounts to 50% of the surcharge on risk-based capital requirements. Note that increases to risk-
based Tier 1 MRC and leverage ratio Tier 1 MRC do not add up, since the total MRC increases
only to the extent the risk-based or leverage ratio requirement exceeds the other capital measure.
Therefore, the leverage ratio column is adjusted to capture this effect (which can be positive or
negative, even where the leverage ratio Tier 1 MRC remains unchanged). This results in an overall
incremental leverage ratio change in MRC which can be either positive or negative. This
mechanism is described in Box B.
For 86 Group 1 banks, the Tier 1 MRC would increase by 2.8%, applying a fully phased-in
definition of the final Basel III standards. This increase is composed of a 2.6% rise in the risk-based
components combined, driven by the positive contributions of the output floor (+1.7%), market risk
(+1.6%), CVA (+0.4%), as well as a reduction in credit risk (-1.0%). The rise of the combined risk-based
components is accompanied by a positive effect of the leverage ratio Tier 1 MRC (+0.1%).
The impact on MRC is very heterogeneous across regions for Group 1 banks (see Table 4).
European banks show the biggest increase in MRC (+15.9%), mostly driven by the output floor (+7.0%).
Nearly all other risk-based components also contribute to the increase: credit risk (+4.3%), operational risk
(+4.2%), market risk (+2.2%) and CVA (+1.6%). Other Pillar 1 requirements as well as the leverage ratio
slightly offset this development (-0.3% and -3.2%, respectively). In comparison, banks in the Americas
report a moderate increase of MRC amounting to 1.9%. Both, risk-based and leverage ratio requirements
contribute to this development with the impact of the leverage ratio requirements being the main
contribution (+1.6% and +0.3%, respectively). The reason for the marginal risk-based increase is the
contrary impacts of the individual risk-categories: the positive effects of market risk (3.4%), credit risk
(0.4%) and other Pillar 1 requirements (0.1%) are compensated by the negative effects of CVA (-0.2%),
operational risk (-1.1%) and the output floor (-2.4%). Contrary to the observations in the Americas and
Europe, banks in the rest of the world report a decrease of MRC (-3.9%), the main driver of this decrease
being credit risk (-4.8%). Negative effects are also observed for operational risk (-1.5%), whereas the output
floor contributes positively (+1.6%). Consequently for this region, risk-based requirements overall
decrease MRC, which is being partly compensated by a positive contribution of leverage ratio
requirements (+0.9%).
G-SIBs (29 banks) show an overall increase of 3.2%, decomposed between 2.2% and 1.0%
increases on risk-based measure and leverage ratio, respectively. The risk-based increase is mostly driven
by market risk 18 (2.0%) and the output floor (1.3%) and compensated by credit risk (-0.9%) and operational
risk (-0.5%).

18
Taking into account the retreatment of overly conservative treatment of investment in funds for several G-SIBs. For more details
please see footnotes 9 and 10.

Basel III Monitoring Report February 2023 31

 For Group 2 banks, the overall -2.0% decrease in Tier 1 MRC is driven by a negative contribution
of the leverage ratio requirements (-9.9%), which offsets the risk-based measures increase of 7.9%. Main
contributors of the risk-based increase are the output floor (5.0%) and credit risk (2.4%).
Note that Group 1 and Group 2 bank samples are not directly comparable due to different
business models and different regional distribution of the samples. 19

Changes in Tier 1 MRC at the target level due to the final Basel III standards
In per cent of overall basis MRC Table 4

Number Total Risk-based requirements

of
Total Of which: Leverage
banks
ratio
Credit CVA Market Op Output Other
risk1 risk risk2 floor3 Pillar 1
Group 1 banks 86 2.8 2.6 –1.0 0.4 1.6 0.0 1.7 –0.1 0.1
Of which: Europe 29 15.9 19.0 4.3 1.6 2.2 4.2 7.0 –0.3 –3.2
Of which: AM 21 1.9 0.3 0.4 –0.2 3.4 –1.1 –2.4 0.1 1.6
Of which: RW 36 –3.9 –4.8 –4.9 0.1 0.0 –1.5 1.6 0.0 0.9
Of which: G-SIBs 29 3.2 2.2 –0.9 0.4 2.0 –0.5 1.3 0.0 1.0
Group 2 banks 40 –2.0 7.9 2.3 0.4 0.0 0.5 5.0 –0.4 –9.9
1
Including securitisation. 2 Figures may not show supervisor-imposed capital add-ons under Pillar 2. Therefore, increases in MRC may
be overstated and reductions may be understated. 3 Net of existing Basel I-based floor according to national implementation of the
Basel II framework.

Source: Basel Committee on Banking Supervision.

Box B

Aggregation of changes in risk-based and leverage ratio MRC

Example 1 shows an illustrative bank that is currently constrained by the Basel III leverage ratio, resulting in
an additional Tier 1 MRC. Under the revised framework, the additional requirement is instead “charged” by the
risk-based Tier 1 MRC with the total change indicated by △RB. This replacement effect is represented as a
negative effect in leverage ratio Tier 1 MRC to avoid double-counting, as shown by the blue arrow (△LR) in the
diagram. Example 2 shows an alternative case where the bank is still constrained by the Basel III leverage ratio
after the reforms. In this case, the contribution of the leverage ratio Tier 1 MRC is the net of (i) the additional
leverage ratio Tier 1 MRC in the revised framework (△LR’); and (ii) the replacement effect captured by the risk-
based Tier 1 MRC (△LR), which may be positive or negative.
Note that even for banks that already adopted the final leverage ratio standards (ie △LR’=0) there may be
a non-zero contribution of the leverage ratio Tier 1 MRC, which is in this case equal to the replacement effect
(△LR).
 A requirement is called constraining if it imposes the largest amount of MRC among the requirements under consideration (here
risk-based and leverage ratio). A requirement is binding on a bank if the resulting MRC are higher than a bank’s corresponding actual
Basel III capital amounts.

19
Please refer to the special feature on regional distributions of Group 1 and Group 2 banks and their impact on results in the
Basel III monitoring reports on page at the end of this report.

32 Basel III Monitoring Report February 2023

 Aggregation of changes in risk-based and leverage ratio MRC Graph A

Example 1 Example 2

Total ∆LR'
Total ΔRB

∆RB

ΔLR ∆LR

Before After Before After

Risk-based MRC (RB) Risk-based MRC (RB)
Leverage-based MRC (LR) Leverage-based MRC (LR)

Graph 22 displays the contributions of each MRC component relative to the current basis for
Group 1 banks, G-SIBs and Group 2 banks, respectively. The arrows pointing upwards (downwards)
highlight the positive (negative) contributions induced by the different parts of the final Basel III
framework, except for the rightmost arrow that represents the total MRC impact. Graph 23 provides the
regional breakdown for Group 1 banks.

Changes in Tier 1 MRC at the target level due to the final Basel III standards Graph 22

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent of overall basis MRC Per cent of overall basis MRC Per cent of overall basis MRC

120 120 120

115 115 115

110 110 110

105 105 105

100 100 100

95 95 95

90 90 90
Leverage ratio
Leverage ratio

CVA
CVA

Credit risk

Market risk

Op risk
Credit risk

Market risk

Op risk

Other Pillar 1
Other Pillar 1

Total
Total

Output floor
Output floor

Leverage ratio
CVA
Credit risk

Market risk

Op risk

Other Pillar 1

Total
Output floor

Credit risk includes securitisation. Operational risk figures may not show supervisor-imposed capital add-ons under Pillar 2. Therefore,
increases in MRC may be overstated and reductions may be understated. Output floor results are net of the existing Basel I-based floor
according to national implementation of the Basel II framework.

Source: Basel Committee on Banking Supervision.

Basel III Monitoring Report February 2023 33

Changes in Tier 1 MRC at the target level due to the final Basel III standards
Group 1 banks Graph 23

Europe Americas Rest of the world

Per cent of overall basis MRC Per cent of overall basis MRC Per cent of overall basis MRC

120 120 120

115 115 115

110 110 110

105 105 105

100 100 100

95 95 95

90 90 90

Leverage ratio
Leverage ratio

CVA
Credit risk

Market risk

Op risk

Other Pillar 1

Total
CVA

Output floor
Credit risk

Market risk

Op risk

Other Pillar 1

Total
Output floor

Leverage ratio
CVA
Credit risk

Market risk

Op risk

Other Pillar 1

Total
Output floor
Credit risk includes securitisation. Operational risk figures may not show supervisor-imposed capital add-ons under Pillar 2. Therefore,
increases in MRC may be overstated and reductions may be understated. Output floor results are net of the existing Basel I-based floor
according to national implementation of the Basel II framework.

Source: Basel Committee on Banking Supervision.

2.3 Leverage ratio

2.3.1 Overall results

The results regarding the Basel III leverage ratios are provided using the following measures for the
numerator and the denominator:
• numerator: the numerator includes two alternative measures of Tier 1 capital:
− initial Basel III Tier 1, which is the Tier 1 capital eligible under the national implementation of
the Basel III framework in place in member countries at the reporting date, including any
phase-in arrangements; and
− fully phased-in final Basel III Tier 1, which is the fully phased-in Basel III definition of Tier 1
capital without considering any transitional arrangements set out in the in the Basel III
framework.
• denominator: the Basel III leverage ratio exposure measure is calculated on the basis of the 2014
or 2017 (final) definition as applicable (see box C). Also note that, contrary to Sections 2.2, 2.4,
2.5 and Section 5.2, throughout Section 2.3 temporary exclusions from the leverage ratio
exposure measure in the context of Covid-19 have not been added back.

34 Basel III Monitoring Report February 2023

 Box C

Basel III leverage ratio framework

Under the January 2014 and December 2017 versions of the Basel III leverage ratio framework, the Basel III
leverage ratio exposure measure (the denominator of the Basel III leverage ratio) includes:
• on-balance sheet assets, excluding securities financing transactions (SFTs) and derivatives;
• SFTs, with limited recognition of netting of cash receivables and cash payables with the same counterparty
under strict criteria;
• derivative exposures at replacement cost (net of cash variation margin meeting a set of strict eligibility
criteria) plus an add-on for potential future exposure;
• written credit derivative exposures at their effective notional amount (net of negative changes in fair value
that have been incorporated into the calculation of Tier 1 capital) reduced by the effective notional amount
of purchased credit derivatives that meet offsetting criteria related to reference name, level of seniority and
maturity;
• off-balance sheet exposures, obtained by multiplying notional amounts by the credit conversion factors in
the standardised approach to credit risk, subject to a floor of 10%; and
• other exposures as specified in the Basel III leverage ratio framework.
 Basel Committee on Banking Supervision, Basel III leverage ratio framework and disclosure requirements, January 2014,
www.bis.org/publ/bcbs270.htm. The Committee agreed revisions to the leverage ratio framework in December 2017, see Basel
Committee on Banking Supervision, Basel III: Finalising post-crisis reforms, December 2017, www.bis.org/bcbs/publ/d424.htm. Please
note that this report does not take into account the treatment of client cleared derivatives exposures as revised by the Committee
in June 2019.

Graph 24 presents summary statistics related to the distribution of Basel III leverage ratios based
on initial and fully phased-in final Basel III Tier 1 capital for Group 1 banks, G-SIBs and Group 2 banks. The
weighted average of the initial Basel III leverage ratios is 6.0% for Group 1 banks and 5.9% for G-SIBs, while
it equals 5.8% for Group 2 banks. The weighted average of the fully phased-in final Basel III leverage ratios
is 6.0% for Group 1 banks and G-SIBs and 5.9% for Group 2 banks. When comparing across groups,
Group 2 banks show a slightly larger interquartile dispersion compared with Group 1 banks, whereas G-
SIBs’ leverage ratios are more concentrated.
The median fully phased-in final Basel III leverage ratio is 5.7% for Group 1 banks, 5.3% for G-SIBs
and 6.3% for Group 2 banks, with all banks well above the 3% minimum. The aggregate leverage
incremental shortfall under the initial framework is again zero in this period.

Basel III Monitoring Report February 2023 35

Initial and fully phased-in final Basel III Tier 1 leverage ratios1 Graph 24

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent
^ ^ ^ ^
14 14 14

12 12 12

10 10 10

8 8 8

6 6 6

4 4 4

2 2 2

0 0 0
Initial Fully phased-in Initial Fully phased-in Initial Fully phased-in
1
See Section 1.3.3 for details on box plots. The blue line is set at 3% (minimum leverage ratio level).

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 25 shows how the fully phased-in final Basel III leverage ratios have evolved over time for
a balanced data set comprising leverage ratio data for all reporting dates from June 2011 to June 2022.
For Group 1 banks, the leverage ratio decreased compared with end-December 2021. This is driven by a
comparatively larger growth in exposure measure relative to the change in Tier 1 capital for Group 1 banks.
The leverage ratio for Group 2 banks shows a decrease as well, driven by both an increase in the leverage
ratio exposure measure as well as a decrease in Tier 1 capital for these banks.
Graph 26 shows the same information as Graph 25, but for a balanced data set of Group 1 banks,
grouped by region. Overall, the leverage ratio has been growing over the past nine years for all regions,
with Europe showing the strongest relative increase and the rest of the world showing the largest absolute
increase. In the last period, the average leverage ratio in the Americas has decreased further and is at its
lowest level since end-June 2014, after a larger decrease in the previous periods, due to the expiration of
Covid-19-related temporary exclusions 20 from the leverage ratio exposure measure in the United States.
Notwithstanding this reduction, leverage ratios continue to be lower in Europe (5.0%) compared with the
Americas (5.8%) and the rest of the world (7.2%).

20
A special feature in the September 2021 report focused on the impact of these exclusions. See Basel Committee on Banking
Supervision, Basel III monitoring report, September 2021, www.bis.org/bcbs/publ/d524.htm.

36 Basel III Monitoring Report February 2023

Fully phased-in final Basel III Tier 1 leverage ratios and component changes1
Balanced data set, exchange rates as of the current reporting date Graph 25

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent Per cent Per cent Per cent

8 20 8 20 8 20

6 15 6 15 6 15

4 10 4 10 4 10

2 5 2 5 2 5

0 0 0 0 0 0

−2 −5 −2 −5 −2 −5

−4 −10 −4 −10 −4 −10

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Leverage ratio (lhs) Change in exposure measure (rhs) Change in Tier 1 capital (rhs)
1
Data points from H1 2011 to H2 2012 use the original definition of the leverage ratio. Data points from H1 2013 to H1 2017 use the
definition of the leverage ratio set out in the 2014 version of the framework. Note that the data points for H1 2013 use an approximation for
the initial definition of the Basel III leverage ratio exposure where gross instead of adjusted gross securities financing transaction values are
used. Data points from H2 2017 onwards use the final definition of the leverage ratio to the extent data are available. Since the Committee
did not collect the relevant data through its Basel III monitoring exercise for the end-June 2020 reporting date, the adjustment from initial to
final leverage ratio exposure measure was calculated based on H2 2019 data.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Fully phased-in final Basel III Tier 1 leverage ratios and component changes,1
by region
Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 26

Europe Americas Rest of the world

Per cent Per cent Per cent Per cent Per cent Per cent

8 20 8 20 8 20

6 15 6 15 6 15

4 10 4 10 4 10

2 5 2 5 2 5

0 0 0 0 0 0

−2 −5 −2 −5 −2 −5

−4 −10 −4 −10 −4 −10

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Leverage ratio (lhs) Change in exposure measure (rhs) Change in Tier 1 capital (rhs)
1
See footnote 1 to Graph 25.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet “Graph 26a” provides
the same breakdown for G-SIBs.

Basel III Monitoring Report February 2023 37

 Graph 27 shows the evolution of the components of the risk-based capital and leverage ratios
over time for a balanced data set, ie banks that have consistently provided the data since June 2011. The
four components are Basel III Tier 1 capital, RWA and the leverage ratio exposure measure, all assuming
full implementation of Basel III, as well as accounting total assets. For Group 1 banks, all four components
have increased steadily over the period. For Group 2 banks, Tier 1 capital generally increased during the
period, with a substantial increase since end-December 2019. RWA, leverage ratio exposure and
accounting total assets have somewhat declined in the first half of the entire observed period, but have
steadily increased in the second half, with a slightly stronger increase for this reporting period. 21 For all
banks, Tier 1 capital has increased at a much higher rate than RWA, accounting assets and leverage ratio
exposures over the entire observed period.
Graph 28 shows the same information for a balanced data set of Group 1 banks, grouped by
region. While leverage exposures decreased from 2011 until 2016 for European Group 1 banks and
remained below the level of 2011 since then, banks in the Americas experienced a moderate increase, and
exposure for Group 1 banks in the rest of the world increased steadily since 2011.

Tier 1 capital, RWA, Basel III leverage ratio exposure and accounting total assets1
Balanced data set, exchange rates as of the current reporting date Graph 27

Group 1 banks Of which: G-SIBs Group 2 banks

30 June 2011 = 100 30 June 2011 = 100 30 June 2011 = 100
250 250 250
225 225 225
200 200 200
175 175 175
150 150 150
125 125 125
100 100 100
75 75 75
50 50 50
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Tier 1 capital Leverage ratio exposure
Risk-weighted assets Accounting total assets
1
Tier 1 capital, RWA and leverage ratio exposure assume full implementation of Basel III. Data points from H1 2010 to H2 2012 use the
original definition of the leverage ratio. Data points from H1 2013 to H1 2017 use the definition of the leverage ratio set out in the 2014
version of the framework. Note that the data points for H1 2013 use an approximation for the initial definition of the Basel III leverage ratio
exposure where gross instead of adjusted gross securities financing transaction values are used. Data points from H2 2017 onwards use the
final definition of the leverage ratio to the extent data are available. Since the Committee did not collect the relevant data through its Basel III
monitoring exercise for the end-June 2020 reporting date, the adjustment from initial to final leverage ratio exposure measure was calculated
based on H2 2019 data, and accounting total assets are taken from end-2019 reporting.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

21
The evolution of the measures for Group 2 banks appears more volatile with a much lower overall increase in Tier 1 capital than
in the previous report due to a significant difference in the balanced sample for Group 2 banks.

38 Basel III Monitoring Report February 2023

Tier 1 capital, RWA, Basel III leverage ratio exposure and accounting total assets,1
by region
Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 28

Europe Americas Rest of the world

30 June 2011 = 100 30 June 2011 = 100 30 June 2011 = 100

300 300 300

250 250 250

200 200 200

150 150 150

100 100 100

50 50 50
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Tier 1 capital Leverage ratio exposure
Risk-weighted assets Accounting total assets
1
See footnote 1 to Graph 27.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

2.3.2 Impact on Basel III leverage ratio MRC measure due to the final standards
Graph 29 assesses, for Group 1 banks, G-SIBs and Group 2 banks, the changes in leverage ratio MRC at
the target level due to the revisions to the Basel III leverage ratio. This captures the change in the definition
of the Basel III leverage ratio exposure measure and the introduction of a G-SIB buffer on top of a 3%
leverage ratio minimum, which amounts to 50% of the G-SIB surcharge on risk-based capital requirements.
The left-hand side panel of Graph 29 shows the overall MRC changes, while the right-hand side panel
shows the changes in MRC due to the changes in the exposure measure only (right-hand panel). The main
driver of the change in MRC is the introduction of the G-SIB buffer in the final Basel III framework, even
though at individual level some banks might be materially impacted by the change of the leverage ratio
exposure measure. Note that many banks have already adopted the final standards. For these banks, the
change in MRC shown below is zero.

Basel III Monitoring Report February 2023 39

Changes in leverage ratio MRC due to revisions in the final standards1 Graph 29

Overall change in MRC at the target level2 Resulting from changes to the exposure measure only
Per cent Per cent

30 30

20 20

10 10

0 0

−10 −10

−20 −20

−30 −30
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks
1
See Section 1.3.3 for details on box plots. To the extent a bank could not provide a component under the 2017 exposure measure, the
relevant component of the 2014 measure was used. If a bank already adopted the revisions to the leverage ratio exposure measure, the
change to the exposure measure equals zero. 2 The increase for G-SIBs is driven by the introduction of a G-SIBs add-on.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

2.4 Combined shortfall amounts under the final Basel III framework

This section shows the regulatory capital shortfalls for the Group 1 and Group 2 bank samples assuming
fully phased-in requirements according to the final Basel III standards. Results for the Basel III monitoring
exercises (data as of end-December 2017 through to the current reporting period) are compared with the
results of the previous cumulative QIS, using data as of end-December 2015. 22 This analysis is based on
an unbalanced data set, ie it relies on the different samples for the different reporting dates.
For this reporting date, Group 1 banks reported total regulatory capital shortfalls at the target
level amounting to €7.8 billion, marking a sharp increase compared with H2 2021 (€0.3 billion). Shortfalls
for CET1 and Tier 2 are the main contributors with €3.5 and €2.4 billion respectively, while the additional
Tier 1 capital shortfall amounts to €1.9 billion. Even though the sample size of Group 1 banks has changed,
these developments do not result from sample changes but from improvements in data quality.
For Group 2 banks, H1 2022 is the first reporting date that shows no CET1, additional Tier 1 or
total regulatory capital shortfall at the target level. This is in line with the aggregate total capital shortfall
steadily decreasing since 2018 except for the H1 2020 period. The total absence of capital shortfalls of
Group 2 banks is due to a change in the sample. 23

22
Basel Committee on Banking Supervision, Basel III Monitoring Report – Results of the cumulative quantitative impact study,
December 2017, www.bis.org/bcbs/publ/d426.htm.
23
Please refer to the special feature on regional distributions of Group 1 and Group 2 banks and their impact on results in the
Basel III monitoring reports on page 105 at the end of this report..

40 Basel III Monitoring Report February 2023

Combined capital shortfalls at the target level
Fully phased-in final Basel III standards1, unbalanced data set, exchange rates as at the reporting
dates Graph 30

Group 1 banks Of which: G-SIBs Group 2 banks

EUR bn EUR bn EUR bn

80 80 8

60 60 6

40 40 4

20 20 2

0 0 0
H2 2015
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022

H2 2015
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022

H2 2015
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022
CET1 Additional Tier 1 Tier 2
1
Results for H2 2015 are based on the Committee’s cumulative Quantitative Impact Study and are not fully comparable from a
methodological point of view. Compared with H2 2017 and H1 2018, the results since H2 2018 include the revised market risk framework as
finalised in January 2019. Since the Committee did not collect all relevant data through its Basel III monitoring exercise for the end-June 2020
reporting date, shortfalls for H1 2020 are estimated using some data from end-2019 reporting.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

2.5 Total loss-absorbing capacity requirements for G-SIBs

2.5.1 Initial Basel III framework

The Committee also collected data on additional total loss-absorbing capacity (TLAC) for G-SIBs, 25 of
which participated in the exercise. Applying the 2019 minimum requirements, one G-SIB in the sample
shows an incremental 24 TLAC shortfall which corresponds to 4.0% of its RWA. Applying the 2022 TLAC
minimum requirements the shortfall increases to 6.4% of the bank’s RWA. Two additional G-SIBs in the
sample report incremental TLAC shortfalls of 2.1% and less than 0.1% against 2022 minimum requirements.
Overall, the shortfall of the two banks amounts to €35.1 billion.

24
The shortfall is incremental to any risk-based and leverage ratio shortfall discussed above.

Basel III Monitoring Report February 2023 41

Distribution of individual G-SIBs’ incremental TLAC surplus and shortfall across
banks1
Fully phased-in initial Basel III standards, pure TLAC implementation2 Graph 31

Applying 2019 TLAC minimum requirements Applying 2022 TLAC minimum requirements
Per cent of RWA Per cent of RWA

30 30

20 20

10 10

0 0

−10 −10

1
Surplus is indicated as positive and shortfall as negative. 2
Ie following the FSB TLAC Term Sheet rather than national implementation.

Source: Basel Committee on Banking Supervision.

2.5.2 Final Basel III framework

The final Basel III reforms, based on end-June 2022 data, resulted in no significant increase in aggregate
capital requirements for the respondent banks. With regard to TLAC, the reforms had a limited effect on
the shortfall considering number of banks and size. Consistent with observations under the initial
framework, one G-SIB reports a shortfall applying the 2019 minimum requirements. This G-SIB, along with
two additional G-SIB, report shortfalls applying the 2022 requirements, totalling €29.8 billion.

Distribution of individual G-SIBs’ incremental TLAC surplus and shortfall across

banks1
Fully phased-in final Basel III standards Graph 32

Applying 2019 TLAC minimum requirements Applying 2022 TLAC minimum requirements
Per cent of RWA Per cent of RWA

30 30

20 20

10 10

0 0

−10 −10

1
Surplus is indicated as positive and shortfall as negative.

Source: Basel Committee on Banking Supervision.

42 Basel III Monitoring Report February 2023

3. Level and composition of regulatory capital

3.1 Level of capital

Graph 33 shows a time series of the level of regulatory capital for a balanced data set of Group 1 banks,
Group 2 banks and G-SIBs. From end-December 2021 to end-June 2022, the level of CET1 capital for
Group 1 banks decreased by €47 billion (or 1.1%) to €4,227 billion. G-SIBs, which collectively held €3,019
billion as of end-June 2022, account for 54% of this decrease. For Group 1 banks, the increase in additional
Tier 1 capital amounts to €6 billion since December 2021, while an increase of Tier 2 capital of €34 billion
is observed.
Over the most recent period, the level of Group 2 banks’ CET1 capital decreased by €2 billion (or
1.6%) to €119 billion. Group 2 banks’ additional Tier 1 capital and Tier 2 capital both decreased by €1
billion and €2 billion, respectively.

Level of capital1
Balanced data set, exchange rates as of the current reporting date Graph 33

Group 1 banks Of which: G-SIBs Group 2 banks

EUR bn EUR bn EUR bn

4,000 4,000 100

3,000 3,000 75

2,000 2,000 50

1,000 1,000 25

0 0 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CET1 Additional Tier 1 Tier 2
1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet “Graph 33a” provides
an additional regional breakdown for Group 1 banks.

Graph 34 shows a time series of the level of regulatory capital for a balanced data set of Group 1
banks, grouped by region, assuming full implementation of final Basel III standards. Over H1 2022, CET1
capital decreased slightly in Europe and the Americas while remaining largely unchanged in the rest of the
world region. While CET1 capital in the rest of the world is now more than three times its value in 2011,
the increase in Europe and in the Americas was more limited at 71% and 84%, respectively.
Additional Tier 1 capital showed some initial declines from 2011 through 2013 in Europe and the
Americas and some mild increases in the rest of the world region. Afterwards, additional Tier 1 capital has
grown significantly in the rest of the world region. The growth of additional Tier 1 capital is more modest
in Europe and especially in the Americas. This development is in line with Tier 2 capital.
The stock of Tier 2 capital has grown compared with the end-June 2011 reference date for all
regions except the Americas. This region experienced a decrease between 2011 and 2014 and has
experienced mild increases thereafter. Since end-December 2021, only the rest of the world region

Basel III Monitoring Report February 2023 43

experienced an increase in the level of Tier 2 holdings (by €63 billion), while banks’ Tier 2 capital slightly
decreased in Europe and the Americas.

Evolution of Basel III capital,1 by region

Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 34

CET1 Additional Tier 12 Tier 2

June 2011 = 100 June 2011 = 100 June 2011 = 100

300 5,000 1,000

250 4,000 800

200 3,000 600

150 2,000 400

100 1,000 200

50 0 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Europe Americas Rest of the world
1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter. 2 The strong percentage increases in additional Tier 1 capital are
driven by the low absolute levels in 2011, in particular for the rest of the world region.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet Graph 34a provides
the same breakdown but shown in EUR amounts.

3.2 Profits, dividends and capital raised

Graph 35 depicts the evolution of profits, dividends, CET1 capital raised and the dividend payout ratio over
time. Overall, Group 1 banks’ profits after tax dropped since end-December 2021 (€263 billion vs €279
billion), but still significantly exceed the pandemic low of €168 billion in H1 2020. G-SIBs also continue to
report profits materially higher than pandemic lows. The annual dividend payout ratios for Group 1 banks
and G-SIBs (calculated over the last two semesters to avoid seasonality issues) increased to 33% and 29%,
respectively, after reaching their lowest values since the beginning of the exercise in the end-June 2021
report with values of 21% and 18% respectively. This can be explained by European banks facing
restrictions in dividends during the Covid-19 pandemic by the European Central Bank.
Group 2 banks increased profits after tax by 57% and doubled dividend payout ratios in H1 2022,
compared with H2 2021.

44 Basel III Monitoring Report February 2023

Profits, dividends, CET1 capital raised externally and dividend payout ratio
Balanced data set, exchange rates as of the current reporting date Graph 35

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent EUR bn Per cent EUR bn Per cent EUR bn

100 250 100 250 100 7.5

80 200 80 200 80 6

60 150 60 150 60 4.5

40 100 40 100 40 3

20 50 20 50 20 1.5

0 0 0 0 0 0

−20 −50 −20 −50 −20 −1.5

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Profit after tax (rhs) Common share dividends (rhs) CET1 raised (rhs)
Dividend payout ratio (lhs)

The dividend payout ratio is calculated as common share dividends divided by profits after tax by using a rolling 12-month window to improve
comparability across countries with different dividend payment patterns.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 36 provides the regional breakdown for Group 1 banks. After tax profits for the Group 1
banks in the sample decreased in Europe (from €61 billion in H2 2021 to €54 billion in H1 2022), and in
the Americas (from €83 billion to €73 billion), while they slightly increased in the rest of the world (from
€135 billion to €136 billion). Over the same period, the annual dividend payout ratios increased by 12, 10
and 6 percentage points for Europe, the rest of the world and the Americas, respectively.
Over the last twelve months, 78 out of the 98 Group 1 banks in the sample raised capital.
Regarding CET1 capital, the total amount raised equals €75.1 billion (see Table 5), including €46.8 billion
raised by G-SIBs.
Group 1 banks raised a similar amount of additional Tier 1 capital (€73.9 billion) and a greater
amount of Tier 2 capital (€134.0 billion) relative to CET1 capital. This could indicate that banks are
continuing to focus on the remaining, not yet fully phased-in, capital requirements such as the leverage
ratio, TLAC and the minimum requirement for own funds and eligible liabilities (MREL) in countries in the
European Union. The relevant regulations stipulate that CET1 capital is not necessarily the exclusive form
of eligible capital to meet these requirements. In other countries, the same may hold true for additional
requirements stemming from Pillar 2. Around 60% of the overall capital raised globally was raised by banks
in the rest of the world region. Over the last twelve months, Group 2 banks focused on Tier 2 capital (40%
of the total capital raised).

Basel III Monitoring Report February 2023 45

Profits, dividends, CET1 capital raised externally and dividend payout ratio, by region
Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 36

Europe Americas Rest of the world

Per cent EUR bn Per cent EUR bn Per cent EUR bn

100 125 100 125 100 125

80 100 80 100 80 100

60 75 60 75 60 75

40 50 40 50 40 50

20 25 20 25 20 25

0 0 0 0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Profit after tax (rhs) Common share dividends (rhs) CET1 raised (rhs)
Dividend payout ratio (lhs)

The dividend payout ratio is calculated as common share dividends divided by profits after tax by using a rolling 12-month window to improve
comparability across countries with different dividend payment patterns.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet “Graph 36a” provides
the same breakdown for G-SIBs.

Capital raised during H2 2021/H1 2022

Full sample of banks1, gross amounts, in billions of euros Table 5

Number of Number of CET1 Add. Tier 1 Tier 2

banks banks that
raised capital
Group 1 banks 98 78 75.1 73.9 134.0
Of which: Europe 28 25 8.9 18.7 25.3
Of which: Americas 22 17 20.8 19.7 19.5
Of which: RW 48 36 45.3 35.6 89.2
Of which: G-SIBs 30 29 46.8 53.8 97.1
Group 2 banks 42 12 1.5 1.0 1.7
1
Table only includes banks that provide data for the current and previous reporting dates.

Source: Basel Committee on Banking Supervision.

Graph 37 depicts the evolution of capital raised over time for a balanced data set. The capital
raised in H1 2022 by Group 1 banks and G-SIBs increased to respectively €104 billion and €80 billion.
Overall, since 2011, the capital raised by G-SIBs accounts for 69% of the capital raised by Group 1 banks.
The CET1 capital raised in H1 2022 by Group 1 banks and G-SIBs decreased to respectively €18.3
billion and €14.1 billion. The decrease in CET1 capital raised by Group 1 banks is driven by European banks
and banks in the rest of the world (-€3.5 billion and -€10.6 billion, respectively). In contrast, American
Group 1 banks increased their CET1 capital raised by €7.3 billion to €9.9 billion.

46 Basel III Monitoring Report February 2023

 Observing total capital raised in H2 2022, it shows that Group 1 banks focussed mainly on raising
Tier 2 capital (Graph 37) standing at €60.7 billion of which €46.4 billion is contributed by G-SIBs. This
continues the trend from the last reporting date. Nevertheless, total capital raised decreased significantly
compared with the previous period. This is driven by Group 1 banks drawing back CET1 capital raised as
well as additional Tier 1 capital raised, summing up to -€26.9 billion.

Capital raised externally

Balanced data set, exchange rates as of the current reporting date Graph 37

Group 1 banks Of which: G-SIBs Group 2 banks

EUR bn EUR bn EUR bn

125 125 10

100 100 8

75 75 6

50 50 4

25 25 2

0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CET 1 Additional Tier 1 Tier 2

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet “Graph 37a” provides
an additional regional breakdown for Group 1 banks.

3.3 Composition of capital

Graph 38 below shows the composition of total capital under the initial Basel III rules. As expected and as
observed on previous reporting dates, CET1 capital continues to be the predominant form of regulatory
capital amongst all banks. As of end-June 2022, the average share of initial Basel III CET1 capital for a
balanced data set of Group 1 banks is 74.5%. For Group 2 banks, the initial Basel III CET1 capital represents
79.3% of regulatory capital at the reporting date. Noticeably, the second largest share of total capital
continues to be Tier 2 capital (15.5% for Group 1 banks and 13.9% for Group 2 banks).
For Group 1 banks, the positive trend of increasing shares of CET1 capital, which had been
observed during the first years of the monitoring exercise, reversed starting in 2013. Since then, we observe
a decline in the share of CET1 capital offset by an increase in additional Tier 1 and Tier 2 capital. The
structure of regulatory capital had somewhat stabilised up to 2017, but CET1 capital has continued to
globally decline over the more recent reporting periods for Group 1 banks, as well as G-SIBs.
For Group 2 banks, the share of CET1 capital has remained fairly stable since end of June 2019,
standing at 79.3% for the current reporting period. Additional Tier 1 share increased modestly during this
time, while Tier 2 decreased.

Basel III Monitoring Report February 2023 47

Structure of regulatory capital under initial Basel III1
Balanced data set Graph 38

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

100 100 100

80 80 80

60 60 60

40 40 40

20 20 20

0 0 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CET 1 Additional Tier 1 Tier 2
1
The graph shows the fully phased-in initial Basel III framework for the data points up to and including the end of 2018 and the actual
framework in place at the reporting date for all data points thereafter.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. Worksheet “Graph 38a” for the
structure of capital under transitional initial Basel III.

With regard to the composition of Basel III CET1 capital itself (Table 6), retained earnings and
paid-in capital continue to comprise the overwhelming majority of CET1 outstanding for both Group 1
and Group 2 banks. For Group 1 banks, retained earnings and paid-in capital make up 96.7% of
outstanding CET1 on average. Accumulated Other Comprehensive Income (AOCI) 25 contributes 2.7% to
Group 1 banks’ CET1 capital on average, but there is significant dispersion across banks and countries.
Meanwhile, CET1 from recognised subsidiaries continues to provide minimal support to Group 1 banks’
outstanding CET1 balances in most countries. For Group 2 banks, the share of paid-in capital and retained
earnings in total CET1 capital is somewhat lower at 78.2%, while the 21.4% share of AOCI is higher
compared with Group 1 banks, again with significant dispersion across banks and countries.

Structure of CET1 capital, by bank group and region

Full sample of banks, in per cent of CET1 capital gross of regulatory adjustments Table 6

Number of Paid in Retained Other comprehensive CET1 from recognised

banks capital earnings income subsidiaries
Group 1 banks 108 22.2 74.5 2.7 0.6
Of which: Europe 39 34.9 54.8 8.8 1.5
Of which: Americas 22 8.5 99.4 –8.0 0.1
Of which: RW 47 22.9 71.2 5.4 0.5
Of which: G-SIBs 30 18.3 79.7 1.2 0.8
Group 2 banks 58 40.6 37.7 21.4 0.4
Source: Basel Committee on Banking Supervision.

25
AOCI typically includes the following: unrealised gains and losses in available for sale securities; actuarial gains and losses in
defined benefit plans; gains and losses on derivatives held as cash flow hedges; and gains and losses resulting from translating
the financial statements of foreign subsidiaries.

48 Basel III Monitoring Report February 2023

3.4 Regulatory adjustments

Using a balanced data set, regulatory adjustments reduce overall gross CET1 capital for the current period
(ie CET1 capital before adjustments) for Group 1 and Group 2 banks by 11.2% and 5.7%, respectively (see
Graph 39). The largest driver of Group 1 bank CET1 capital adjustments continues to be goodwill (6.6%).
The largest driver of Group 2 banks’ adjustments are intangibles and other deductions (1.6% and 1.7%,
respectively).
Looking at Group 1 banks, most countries (16 out of 22) report zero adjustments from the
transitional add-backs from ECL provisioning. Six countries report positive impacts while one reports a
material negative impact.

Regulatory CET1 capital adjustments under fully phased-in initial Basel III
Balanced data set, in per cent of CET1 capital prior to adjustments Graph 39

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

0 0 0

−10 −10 −10

−20 −20 −20

−30 −30 −30

−40 −40 −40

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Goodwill Financials ECL Provisioning
Intangibles DTA above threshold Other3
DTA1 Excess above 15%2
1
DTAs are the deferred tax assets that are deducted in full under Basel III (ie they exclude DTAs that are related to temporary differences,
which are only deducted when they exceed a threshold). 2 Excess above 15% pertains to significant investments in the common shares of
unconsolidated financial institutions, mortgage servicing rights, and DTAs due to timing differences that do not separately exceed the 10%
category thresholds but in the aggregate exceed the 15% basket threshold. 3 Other includes adjustments related to investment in own
shares, shortfall of provisions to expected losses, cash flow hedge reserves, cumulative changes in fair value due to changes in own credit risk,
net pension fund assets, securitisation gains on sale, mortgage servicing rights and deductions from additional Tier 1 capital to the extent
they exceed a bank’s additional Tier 1 capital.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Basel III Monitoring Report February 2023 49

Regulatory CET1 capital adjustments under rules applicable at the reporting dates
Balanced data set, in per cent of CET1 capital prior to adjustments Graph 40

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

0 0 0

−5 −5 −5

−10 −10 −10

−15 −15 −15

−20 −20 −20

−25 −25 −25

2015

2016

2017

2018

2019

2020

2021

2022
2015

2016

2017

2018

2019

2020

2021

2022

2015

2016

2017

2018

2019

2020

2021

2022
Goodwill Financials ECL Provisioning
Intangibles DTA above threshold Other3
DTA1 Excess above 15%2
1
DTAs are the deferred tax assets that are deducted in full under Basel III (ie they exclude DTAs that are related to temporary differences,
which are only deducted when they exceed a threshold). 2 Excess above 15% pertains to significant investments in the common shares of
unconsolidated financial institutions, mortgage servicing rights, and DTAs due to timing differences that do not separately exceed the 10%
category thresholds but in the aggregate exceed the 15% basket threshold. 3 Other includes adjustments related to investment in own
shares, shortfall of provisions to expected losses, cash flow hedge reserves, cumulative changes in fair value due to changes in own credit risk,
net pension fund assets, securitisation gains on sale, mortgage servicing rights and deductions from additional Tier 1 capital to the extent
they exceed a bank’s additional Tier 1 capital.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4. Components and determinants of risk-based capital requirements

4.1 Share of different risk types in overall MRC under current rules

Graph 41 shows the evolution of the share of different asset classes in overall MRC for a balanced data
set. 26 As of June 2022 and for a balanced data set of Group 1 banks, credit risk 27 continues to be the
dominant portion of overall MRC, on average covering 65.4% of total MRC. However, the share of credit
risk has declined significantly from 75.6% at end-June 2011 to its lowest share of 64.3% at end-December
2014 and since then slightly increased to the level at the current reporting date. This looping trend was
mainly driven by a decrease in the MRC for retail (18.0% to 14.3%), related entities (10.0% to 2.4%) and
securitisations (5.8% to 2.1%) while the MRC for corporate exposures increased over the observed period
from 32.5% at end-June 2011 to 36.9% at the current reporting date.
The share of operational risk MRC increased sharply from 7.7% at the end of June 2011 to 14.9%
at the end of 2018 and decreased slightly since. The increase in the early 2010s was attributed in large part
to the surge in the number and severity of operational risk events during and after the financial crisis,

26
MRC figures in this section are based on the total capital ratio, ie based on 8% of RWAs. Where applicable, MRCs reflect the
effect of the 1.06 scaling factor applied to IRB credit RWA, and deductions assigned to the securitisation and related entities
asset classes.
27
Here overall credit risk is defined as the sum of corporate, bank, retail, sovereign, partial-use, securitisations and related entities
as illustrated in the graph.

50 Basel III Monitoring Report February 2023

which are factored into the calculation of MRC for operational risk under the advanced measurement
approach. More recently, we observe some “fading out” of the financial crisis losses so that in 2020, the
lowest loss level of the past 10 years is observed. This explains the latest decrease in capital requirements
especially for the banks heavily affected in the financial crisis. On the other hand, losses triggered by the
Covid-19 pandemic do not yet have a significant impact on the loss severity level, but this may change
given that the pandemic is still ongoing.
The share of market risk decreased strongly until end 2019 (from 7.1% in end-2011 to 4.1%) to
stabilise around 5% since (4.9% in June 2022). while the shares of “other” risk and of the floor requirement
have been somewhat stable at around 10% and 2%, respectively, although floor requirements increased
more recently to 3.1% at end December 2021 and 3.5% in June 2022.
For Group 2 banks, the drop in overall MRC in the second half of 2017 as well as the drop in the
share of floors is due to a change in the Basel I floor reporting approach in several countries.

Share of MRC by asset class1 according to current rules

Balanced data set Graph 41

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

100 100 100

80 80 80

60 60 60

40 40 40

20 20 20

0 0 0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Corporate Retail Related entities Operational risk Total (June 2011=100)
Bank Partial use CVA Floors
Sovereign Securitisation Market risk Other
1
Exposures subject to partial use of the standardised approach for credit risk that cannot be assigned to a specific portfolio, as well as past-
due items under the standardised approach, are listed separately as “partial use”. “Related entities” includes capital requirements specified in
Part 1 of the Basel II framework. The category “other” includes capital requirements for other assets; the current Basel I-based output floor;
Pillar 1 capital requirements in member countries for risks not covered by the Basel framework; reconciliation differences; and additional
capital requirements due to regulatory calculation differences and general provisions. The latter item can lead to negative capital requirements
in cases where there is an excess in provisions, which can be recognised in a bank’s Tier 2 capital. Furthermore, for banks that apply the
standardised approach, general provisions may be recognised to some extent as Tier 2 capital; consequently, MRC is reduced by this amount.
The term “reconciliation differences” refers to the difference between MRC reported at the entire bank level and the sum of MRC reported
for the individual portfolios.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Table 7 provides data on relative sizes of asset classes in terms of exposures as well as MRC for
both Group 1 and Group 2 banks according to current rules at the reporting date. The sample differs
considerably from the balanced data set used for the time series above, resulting in differences for the
values at the reporting date. The average risk weight suggests the relative riskiness of the different asset
classes as measured by the current framework. Both the numerator (12.5 times MRC) and the denominator
(exposure amounts) of this ratio include exposures under the IRB and standardised approaches for credit

Basel III Monitoring Report February 2023 51

risk. 28 Since a common exposure measure for credit, market and operational risk does not exist, the size
in terms of exposure and the average risk weight are only defined for asset classes subject to a credit risk
treatment.

Looking at Group 1 banks, we observe that corporate exposures are the biggest in size with 31.4%
of total exposures and in RWAs and is applied a 56.4% risk weight. Retail and sovereign asset classes
represent almost half of exposures although a small share of RWAs as they have a low risk density and an
average risk weight at 27.7% and 5.5%, respectively. For Group 2 banks retail and sovereign asset classes
comprise almost two third (63.7%) of exposures, corporates represent 17.7% adding up to more than 80%
of the total. Group 2 banks’ average risk weight for overall credit risk is lower by 9.1 percentage points at
31.2%, versus 40.3% for Group 1 banks. This is largely driven by Group 2 banks’ lower average risk weights
for sovereign, bank and retail exposures.

28
The asset classification is mainly based on the IRB approach. Exposures subject to partial use of the standardised approach for
credit risk which cannot be assigned to a specific portfolio, as well as past-due items under the standardised approach, are
listed separately in Table 7.

52 Basel III Monitoring Report February 2023

 Average asset class/risk type size and average risk weight1
In per cent Table 7

Group 1 Group 2
Size Size MRC Average risk Size Size MRC Average risk
exposure weight exposure weight
Credit risk; of which: 98.9 79.6 32.5 99.6 83.5 26.1
Corporate 31.4 43.9 56.4 17.7 35.1 61.9
Sovereign 25.5 3.5 5.5 36.7 3.2 2.7
Bank 6.5 3.9 23.9 8.2 5.3 20.2
Retail 23.9 16.4 27.7 27.0 20.8 23.9
Equity 0.7 3.9 226.8 0.9 5.5 200.6
Purchased receivables 0.2 0.1 19.7 0.0 0.0
Securitisation 2.2 1.5 27.2 0.6 0.5 24.5
Related entities 0.1 1.0 432.2 0.0 0.0
Past-due items 0.1 0.2 91.2 0.2 0.7 112.8
Other assets 4.9 6.7 55.1 1.0 3.0 95.3
Failed trades and non- 0.0 0.1 105.4 0.0 0.0
DVP transactions
Not assigned2 3.4 8.1 95.5 7.4 11.2 47.4
Regulatory difference 3
–9.6 –1.8
CVA 1.0 1.5 57.0 0.4 1.1 94.4
Trading book CCR4 0.2 0.0
Market risk 3.8 2.0
Other trading book 0.1 0.0
Operational risk 11.9 10.1
Floor adjustment 2.0 0.0
Other 5
0.8 3.2
Total 100.0 100.0 40.3 100.0 100.0 31.2
1
MRC figures in this table are based on the minimum total capital ratio (ie based on 8% of RWAs). 2 The “not assigned” asset class only
includes those exposures subject to partial use of the standardised approach that could not be assigned to one of the other asset
classes. 3 Includes shortfall (positive) or excess (negative) of provisions over expected loss amounts for exposures subject to the IRB
approach for credit risk as well as general provisions (negative) for exposures subject to the standardised approach for credit risk to the
extent they are recognised in Tier 2 capital. 4 Counterparty credit risk in the trading book. 5 Includes the reconciliation asset class and
other Pillar 1 capital requirements.

Source: Basel Committee on Banking Supervision.

4.2 Credit risk

4.2.1 Share of credit risk exposure by asset classes under the current rules
The left-hand panel of Graph 42 shows the evolution of credit exposure for the seven major asset classes
for a balanced data set of 40 Group 1 banks. The composition of credit risk exposures has remained
relatively stable as overall exposure levels have grown by 60.2% over the entire period, with an increase in
the last period. However, the share of sovereign exposures has increased steadily in recent years and, after
a slight decline in 2018 and 2019, increased substantially in 2020, and reached its peak at 30.3% at the end
of December 2021. The share of exposures to sovereigns and retail has declined slightly over the last
semester, while the shares of exposures to corporates and banks, exposures subject to the partial use of

Basel III Monitoring Report February 2023 53

the standardised approach and other credit exposures have increased slightly. The right-hand panel of
Graph 42 shows the same analysis for the subset of 18 G-SIBs.

Share of credit exposure

Balanced data set Graph 42

Group 1 banks Of which: G-SIBs

Per cent Per cent

150 150

125 125

100 100

75 75

50 50

25 25

0 0
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022
Corporate Retail Partial use Other credit
Bank Sovereign Securitisation Total (June 2011=100)

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.2.2 Impact of revisions to the standardised and IRB approaches for credit risk on MRC
Graph 43 shows the changes in terms of current Tier 1 MRC associated with exposures under the
standardised and IRB approaches for credit risk due to the final Basel III framework. The left-hand panel
shows the overall distribution of the impact, while the right-hand panel provides a breakdown by asset
class. On average, the impact on the change of Tier 1 MRC is positive for Group 2 banks (+3.2%) while for
Group 1 banks, the impact indicates a decrease in capital requirements of -2.3% (and a decrease of -2.6%
for G-SIBs).
The right-hand panel of Graph 43 breaks down the impact by asset class. For Group 1 banks,
exposures to corporate and other assets contribute to a significant decrease in MRC, while the contribution
of bank and covered bonds is positive. For Group 2 banks, the increase in MRC is primarily due to
exposures to corporate, bank and covered bonds, real estate and to equity. As regards exposures to
corporates, the results are mainly driven by the removal of the 1.06 scaling factor in the IRB formula and
the reduction of the supervisory loss-given-default (LGD) parameter for unsecured corporate exposures
from 45% to 40% under the foundation IRB approach. Other relevant changes with major impacts relate
to the removal of the advanced IRB approach for exposures to banks and the removal of all IRB approaches
for equity exposures.

54 Basel III Monitoring Report February 2023

Changes in Tier 1 MRC for credit risk due to the final Basel III standards Graph 43

Overall distribution1 Breakdown by asset class

Per cent Per cent

40 3

20 1

0 −1

−20 −3

−40 −5
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks

Overall Equity
Sovereign Funds
Bank and covered bonds Subordinated debt
Retail Other assets
Real estate Failed trades
Corporate Defaulted
Financial institution
1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

The regional breakdown for Group 1 banks in Graph 44 highlights differences in impact between
the three regions, which however should be carefully considered given the variable and limited number of
banks per region included in the sample. The change in MRC is positive for Europe (+6.1%) but slightly
negative for the Americas (-0.1%) and negative for the rest of the world (-6.7%). In Europe, the impact is
positive for almost all asset subclasses, with corporate, retail, banks and covered bonds having the largest
impact. In the Americas, the impacts on equity and corporates, the largest drivers, go in the opposite
direction and almost offset each other. The impact on corporates drives the large decrease in MRC in the
rest of the world.

Basel III Monitoring Report February 2023 55

Changes in Tier 1 MRC for credit risk due to the final Basel III standards, by region
Group 1 banks Graph 44

Overall distribution1 Breakdown by asset class

Per cent Per cent

40 6

20 2

0 −2

−20 −6

−40 −10
Europe Americas Rest of the world Europe Americas Rest of the world

Overall Equity
Sovereign Funds
Bank and covered bonds Subordinated debt
Retail Other assets
Real estate Failed trades
Corporate Defaulted
Financial institution
1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.2.3 Standardised approach for credit risk

Impact of the revisions on MRC

Graph 45 shows the changes in Tier 1 MRC due to the finalisation of the Basel III standards for credit risk
exposures that are currently under the standardised approach. These data include exposures of banks
subject to the standardised approach for credit risk as well as exposures of banks using the IRB approach
for credit risk to the extent that they are subject to partial use provisions. It does not include exposures
currently under the IRB approach that migrate to the standardised approach under the revised framework
(eg IRB equity exposures). Note that changes in Tier 1 MRC are calculated as a percentage of current Tier 1
MRC associated with exposures currently under the standardised approach only.
The left-hand panel of the graph shows the overall distribution of the impact. The revised
standardised approach for credit risk results in a weighted average increase in MRC of 1.2% for Group 1
banks, 1.5% for G-SIBs and 3.8% for Group 2 banks.
The right-hand panel provides a breakdown of the change in MRC by asset class. For Group 1
banks in the sample, the asset classes with the greatest contribution to the overall increase in MRC are
exposures to banks and covered bonds followed by corporates. MRC for investment in funds, real estate
and defaulted exposures are largely unchanged while exposures to equity and other assets on average
show a decrease in MRC. For Group 2 banks, the increase in MRC is primarily driven by equity exposures
and real estate exposures followed by exposures to corporates, banks and covered bonds. The changes in
MRC for other asset classes are relatively smaller. The results suggest a large variation across asset classes
and countries.

56 Basel III Monitoring Report February 2023

Changes in Tier 1 MRC for exposures subject to the standardised approach for
credit risk due to the final Basel III standards Graph 45

Overall distribution1 Breakdown by asset class

Per cent Per cent

100 9

75 6

50 3

25 0

0 −3

−25 −6
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks

Overall Equity
Sovereign Funds
Bank and covered bonds Subordinated debt
Retail Other assets
Real estate Failed trades
Corporate Defaulted

Data generally include banks subject to the standardised approach for credit risk and exposures subject to partial use of banks using the IRB
approach for credit risk. 1 See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 46 replicates the analysis of Graph 45 but breaks down the results for Group 1 banks by
geographical region. On average, the revised standardised approach entails a positive impact on the MRC
in Europe (7.8%) and in the rest of the world (0.7%) while it shows a negative impact on the MRC in
Americas (-4.6%).
Looking at individual asset classes, the results are somewhat heterogeneous. Exposures to retail
are the largest contributor to the increase in MRC for banks in Europe but show a smaller positive impact
in the rest of the world and a negative impact in the Americas. Exposures to corporates represent the
largest negative impact in the Americas but a significant positive impact in the other two regions. Equity
exposures have a positive impact for banks in Europe and the Americas, but a significant negative impact
for banks in the rest of the world. Exposures to banks and covered bonds are the largest positive
contributors for banks in the rest of the world, while their effect is positive but more muted in Europe and
in the Americas. Real estate exposures show a positive impact in Europe and a large and negative impact
in the Americas.

Basel III Monitoring Report February 2023 57

Changes in Tier 1 MRC for exposures subject to the standardised approach for
credit risk due to the final Basel III standards, by region
Group 1 banks Graph 46

Overall distribution1 Breakdown by asset class

Per cent Per cent

100 6

75 3

50 0

25 −3

0 −6

−25 −9
Europe Americas Rest of the world Europe Americas Rest of the world

Overall Equity
Sovereign Funds
Bank and covered bonds Subordinated debt
Retail Other assets
Real estate Failed trades
Corporate Defaulted

Data generally include banks subject to the standardised approach for credit risk and exposures subject to partial use of banks using the IRB
approach for credit risk. 1 See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.2.4 Internal ratings-based approach for credit risk

Impact of the revisions on MRC

Graph 47 summarises the change in Tier 1 MRC due to the IRB revisions for all credit risk exposures that
are currently under the IRB approach, regardless of which approach they are subject to under the final
Basel III standards. Therefore, it includes equity exposures currently under the IRB approach, even if under
the revised standards their MRC will be calculated using the standardised approach. The sample of banks
included in this section differs from the sample of IRB banks in the previous sections. Moreover, changes
in Tier 1 MRC in this section are calculated as a percentage of current Tier 1 MRC associated with exposures
under the IRB approach only.
The left-hand panel of Graph 47 shows the overall distribution of the impact. In aggregate, the
revisions to the IRB approach appear to result in a decrease in overall Tier 1 MRC for Group 1 banks (-3.9%)
and G-SIBs (-4.0%), and an increase for Group 2 banks (+2.2%). Median values, which are less sensitive to
extreme values and are not weighted, show a more moderate impact for all groups.
The right-hand panel of Graph 47 breaks down the impact by asset class. Exposures to corporates
are the main contributors to the overall decrease in MRC for Group 1 banks and G-SIBs while they drive
the increase in MRC for Group 2 banks. The MRC for exposures to retail shows a decrease for all groups.
Although the new restrictions on the scope of IRB approaches for certain asset classes and the revised
input floors on certain IRB parameters (eg increased PD floors) may suggest an increase in MRC, an overall
decrease in MRC is observed for Group 1 banks and G-SIBs. This impact may be explained by, among
others, four factors: (i) certain jurisdictions currently apply super-equivalent requirements, which the
analysis assumes will not be carried over to the new framework, (ii) the changes in the Foundation IRB
rules, which in many cases result in a decrease in MRC, (iii) the removal of the 1.06 IRB scaling factor, and

58 Basel III Monitoring Report February 2023

(iv) the lower LGD floor for retail residential mortgages (though it applies on exposure rather than portfolio
level). The impact of points (i) and (ii) may be amplified when the affected countries also make up a
substantial amount of total exposures in the sample.
Exposures to corporates contribute the most to the overall increase in MRC for Group 2 banks
(while they represent a large decrease for Group 1 banks and G-SIBs), followed by exposures to financial
institutions. As expected, the MRC for exposures to banks and covered bonds indicate an increase for all
groups with a greater contribution for Group 1 banks and G-SIBs.

Changes in Tier 1 MRC for exposures subject to the IRB approach for credit risk
due to the final Basel III standards1 Graph 47

Overall distributon2 Breakdown by asset class

Per cent Per cent

40 3

20 0

0 −3

−20 −6

−40 −9
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks

Overall Financial institution

Sovereign Failed trades
Bank Equity
Retail Funds
Purchased receivables Other assets
Corporate
1
The change is calculated as a percentage of current Tier 1 MRC across all IRB exposures. The impact when summing over all asset classes
is slightly different from the overall impact reported. The reason is that when summing over all asset classes changes in the difference between
provisions and expected losses are not taken into account, whereas in the overall impact calculation a change in the shortfall in provisions is
reflected in the change in MRC. 2 See Section 1.3.3 for details on box plots.”

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 48 replicates the analysis of Graph 47 but breaks down the results by geographical region
considering only Group 1 banks. Overall, the revisions to the IRB approach lead to an average increase in
Tier 1 MRC for Group 1 banks in Europe (+5.4%) and the Americas (+1.3%) and a significant decrease for
banks in the rest of the world (-10.6%). The impact is heterogeneous across banks in each group.
For banks in Europe, exposures to corporate, banks and covered bonds, and financial institutions
are the main contributors to the overall increase in MRC. For banks in the Americas, the increase in MRC
is almost entirely driven by equity exposures and exposures to banks and covered bonds, while the
remaining exposures show a negative or negligible change. For banks in the rest of the world, the decrease
in MRC is mainly driven by exposures to corporates.

Basel III Monitoring Report February 2023 59

Changes in Tier 1 MRC for exposures subject to the IRB approach for credit risk
due to the final Basel III standards,1 by region
Group 1 banks Graph 48

Overall distribution2 Breakdown by asset class

Per cent Per cent

40 5

20 0

0 −5

−20 −10

−40 −15
Europe Americas Rest of the world Europe Americas Rest of the world

Overall Financial institution

Sovereign Failed trades
Bank Equity
Retail Funds
Purchased receivables Other assets
Corporate
1
The change is calculated as a percentage of current Tier 1 MRC across all IRB exposures. The impact when summing over all asset classes
is slightly different from the overall impact reported. The reason is that when summing over all asset classes changes in the difference between
provisions and expected losses are not taken into account, whereas in the overall impact calculation a change in the shortfall in provisions is
reflected in the change in MRC. 2 See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Risk parameters by IRB asset classes under current rules

This section presents time series of IRB risk parameters under current rules for a sample of Group 1 banks
only. 29 Graph 49 shows probability of default (PD) and the share of defaulted exposures for different asset
classes for a balanced data set of Group 1 banks over time. It should be noted that the share of defaulted
exposures is a stock variable, which depends highly on banks’ workout processes upon default. Banks may
choose to sell off defaulted exposures to external parties after default or retain them on balance sheet,
which would heavily impact this metric. In addition, since the share of defaulted exposures is a stock
variable, it should not be confused with a default rate, which could be compared with PDs for backtesting
purposes.
The left-hand panel of Graph 49 shows a general downward trend in the share of defaulted
exposures, with the exception of a temporary increase for sovereign between 2011 and 2012 due to the
sovereign debt crisis, and a marked increase in the share of bank defaulted exposures beginning in 2020. 30
Looking at PDs for non-defaulted exposures (right-hand panel), we also note a general downward trend,
most pronounced for retail exposures, with a slight increase in PDs for bank exposures over the last
semesters. The PD for sovereign exposures is at its lowest value after a spike at the end of 2019.

29
For point in time distribution plots of the various risk parameters by asset class, as well as the share of defaulted exposures, we
refer to worksheets “Graph 48a” to “Graph 48d” in the Excel data file.
30
The marked increase for bank exposures since December 2020 is due to a significant increase for one large bank.

60 Basel III Monitoring Report February 2023

Share of defaulted exposures and PDs for non-defaulted exposures by asset class
Group 1 banks, balanced data set Graph 49

Share of defaulted exposures PDs for non-defaulted exposures

Per cent Per cent Per cent Per cent

0.8 4 0.4 2

0.6 3 0.3 1.5

0.4 2 0.2 1

0.2 1 0.1 0.5

0 0 0 0
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022
Corporate (rhs) Bank (lhs) Sovereign (lhs) Retail (rhs)

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

With respect to the retail asset classes (Graph 50), the negative trend in PDs described above
seems to be driven by other retail exposures, even though it shows an increase during the last semester.
Retail mortgage PDs for non-defaulted exposures show a slight downward trend from the end of 2018.

Share of defaulted exposures and PDs for non-defaulted exposures

by retail sub-asset classes
Group 1 banks, balanced data set Graph 50

Share of defaulted exposures PDs for non-defaulted exposures

Per cent Per cent

4 4

3 3

2 2

1 1

0 0
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Retail mortgages Other retail Retail QRE

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

LGD estimates are supposed to reflect economic downturn conditions and therefore should be
somewhat more stable than PDs. This is reflected in Graph 51. Nonetheless, LGDs for non-defaulted
exposures slightly increased in the last semester for the bank and retail asset classes while it has slightly
decreased for the sovereign asset class.

Basel III Monitoring Report February 2023 61

LGDs for non-defaulted exposures by asset class
Group 1 banks, balanced data set Graph 51

Per cent

35

30

25

20

15
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Corporate Bank Sovereign Retail

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

LGDs for non-defaulted exposures by retail sub-asset class

Group 1 banks, balanced data set Graph 52

Per cent

80

60

40

20

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Retail mortgages Other retail Retail QRE

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.2.5 Impact of revisions to credit risk on MRC over time

This report presents the impact of the finalised Basel III framework since end-2017. As such, the report
now includes time series analysis starting from the December 2017 reporting period up until the current
reporting period. Graph 53 and Graph 54 below show the estimated changes in Tier 1 MRC by credit risk
approach across this period, for a balanced data set of banks, by bank group and region respectively.
The estimated impact of the credit risk reforms as a whole on aggregate MRC shows a negative
trend over time, driven mainly by exposures under the IRB approach. Looking at the regional breakdown,
we observe a consistent negative trend for banks in the rest of the world which, when considering the
increase over time of their share in global credit risk RWA, drives the overall results at the global level. In
Europe, the increase in MRC remains above 5.6% over the whole period reaching a peak in December 2020
(7.0%) before falling back closer to the values previously observed end-2019 and in the first half of 2020.

62 Basel III Monitoring Report February 2023

The evolution is less straightforward for the Americas, for which the change in MRC varies from 0.1% at
end-2018 to 3.9% at end-2021, reaching an intermediate percentage in the last semester (2.0% in June
2022).
The evolution of credit risk MRC impact over time could be explained by three drivers. First, every
Basel III monitoring exercise is a snapshot at a given reporting period where a static balance sheet is
assumed. Banks’ balance sheets naturally evolve over time, which affects the MRC impact. Second,
familiarity with the revised Basel III framework is naturally higher in the later reporting periods.
Consequently, banks may be able to more accurately reflect the revised framework without having to rely
on (often overly conservative) assumptions – the so-called “QIS bias” – in more recent reporting periods.
Third, when measuring the impact over time the starting point, ie the current MRC, may have increased
due to national legislation changes or supervisory practices (eg stricter supervision on asset classification
under the standardised approach or more stringent model validations under the IRB approach).

Changes in Tier 1 MRC for credit risk exposures due to the final Basel III standards
over time
Balanced data set Graph 53

All banks Group 1 banks Group 2 banks

Per cent Per cent Per cent

15 15 15

10 10 10

5 5 5

0 0 0

−5 −5 −5

−10 −10 −10

H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022

H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
Standardised approach Internal ratings-based approach Total H1 2022
Since the Committee did not collect these data through its Basel III monitoring exercise for the end-June 2020 reporting date, results for
H1 2020 show the same values as for H2 2019.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Basel III Monitoring Report February 2023 63

Changes in Tier 1 MRC for credit risk exposures due to the final Basel III standards
over time
Balanced data set Graph 54

Europe Americas Rest of the world

Per cent Per cent Per cent

5 5 5

0 0 0

−5 −5 −5

−10 −10 −10

H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022

H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
H2 2021
H1 2022
Standardised approach Internal ratings-based approach Total

Since the Committee did not collect these data through its Basel III monitoring exercise for the end-June 2020 reporting date, results for
H1 2020 show the same values as for H2 2019.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.2.6 Distribution of exposure at default and risk-weighted assets across approaches

The left-hand panel of Graph 55 shows the composition of exposure at default (EAD) under different
modelling and non-modelling approaches. For the purpose of this section, “slotting” refers to the EAD that
is subject to the supervisory slotting criteria approach for specialised lending. For Group 1 banks, the
portion of exposures under the advanced IRB approach decreases from 53.7% to 40.3% under the revised
framework, while exposures under the foundation IRB approach increase from 15.5% to 28.7% of total
exposure value. Exposures under the standardised approach increase from 27.9% to 28.8%. These changes
are driven by the removal of the option to use the advanced IRB approach for exposures to financial
institutions and large corporates, which migrate to the foundation IRB approach, and by the removal of
the option to use the IRB approach for equity exposures (included in the “Other” category), which move
to the standardised approach. For Group 2 banks, the changes follow a similar trend but are less
pronounced due to the relatively larger share of exposures under the standardised approach.
The right-hand panel of Graph 55 replicates the exercise for the distribution of RWA. For Group 1
banks, RWA under the advanced IRB approach decrease from 35.3% to 24.1%, RWA under the foundation
IRB approach increase from 25.4% to 35.2% and RWA under the standardised approach increase from
32.0% to 37.7% of total RWA. For Group 2 banks RWA under the advanced IRB approach decrease from
28.4% to 27.0%, RWA under the foundation IRB approach increase from 8.1% to 9.3% and RWA under the
standardised approach increase from 59.3% to 61.6%. These changes follow from the change in the
allocation across IRB and standardised approaches described above.

64 Basel III Monitoring Report February 2023

Distribution of EAD and RWA by approach under the current rules and the final
Basel III standard Graph 55

EAD RWA
Per cent of total EAD Per cent of total RWA

100 100

80 80

60 60

40 40

20 20

0 0
Group 1 final

G-SIBs final

Group 2 final
Group 1 current

G-SIBs current

Group 2 current

Group 1 final

G-SIBs final

Group 2 final
Group 1 current

G-SIBs current

Group 2 current
Advanced IRB Foundation IRB Other Standardised approach Slotting
1
“Other” includes equity exposures, equity investments in funds, failed trades and non-DVP transactions and other assets under the IRB
approach for credit risk.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Distribution of EAD and RWA by approach under the current rules and the final
Basel III standard, by region
Group 1 banks Graph 56

EAD RWA
Per cent of total EAD Per cent of total RWA

100 100

80 80

60 60

40 40

20 20

0 0
Europe final

Americas final

final
Europe current

Americas current

current

Europe final

Americas final

final
Europe current

Americas current

current
Rest of the world

Rest of the world

Rest of the world

Rest of the world

Advanced IRB Foundation IRB Other Standardised approach Slotting

1
“Other” includes equity exposures, equity investments in funds, failed trades and non-DVP transactions and other assets under the IRB
approach for credit risk.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Basel III Monitoring Report February 2023 65

 Additional constraints to modelling will apply due to the introduction of risk parameter floors.
The risk parameter floors introduce a five basis points PD floor, 31 which will be binding for some IRB
exposures. Furthermore, some exposures subject to the advanced IRB approach will be bound by the risk
parameter floors on LGD and EAD. These risk parameter floors together with the output floor further
reduce the shares of EAD and RWA that are effectively subject to unconstrained modelling; these effects
are however not shown in the graphs above.

4.2.7 Impact of the revised securitisation framework

This section explores the impact of the Basel III securitisation framework. 32 In particular, the analysis
focuses on the following issues:
• the estimated impact on RWA for securitisation exposures of the implementation of the Basel III
securitisation framework, when compared with the Basel 2.5 framework; and
• the prevalence of “simple, transparent and comparable” (STC) vs non-STC exposures and its
relationship with the approach used for the calculation of capital requirements.

General overview of the securitisation framework

The main changes of the Basel III securitisation framework in comparison to the previous framework are:
• harmonisation of the treatment of banks operating under the standardised or IRB approaches;
• adjustment of the hierarchy of approaches in order to avoid the mechanistic reliance on external
ratings;
• inclusion of additional risk drivers and better recognition of existing risk drivers;
• introduction of preferential risk weights for simple, transparent and comparable (STC) term and
short-term securitisations, typically in asset-backed commercial paper (ABCP) structures; and
• complete recalibration of all available approaches and increase in the risk weight floor from
currently 7% to 10% and 15% for STC exposures and for non-STC exposures, respectively.
The Basel III securitisation framework provides banks with three approaches to calculate RWAs.
The definition of which approach will apply follows a defined hierarchy – the capital requirements for
securitisation exposures are calculated according to the following sequence:
• Securitisation Internal Ratings-Based Approach (SEC-IRBA);
• Securitisation External Ratings-Based-Approach (SEC-ERBA); 33
• Securitisation Standardised Approach (SEC-SA).
In addition, banks that are allowed to use SEC-ERBA may also use an additional approach, the
Internal Assessment Approach (SEC-IAA) to calculate RWAs for unrated securitisation exposures
(predominantly liquidity facilities or credit enhancements) to an SA pool within an asset-backed
commercial paper (ABCP) conduit. And in November 2020, the Committee approved a technical
amendment setting out capital requirements for non-performing loan (NPL) securitisations. 34

31
The PD floor will be 10 basis points for certain qualifying revolving retail (QRRE) exposures.
32
Basel Committee on Banking Supervision, Revisions to the securitisation framework, amended to include the alternative capital
treatment for “simple, transparent and comparable” securitisations, July 2016, www.bis.org/bcbs/publ/d374.htm and Basel
Committee on Banking Supervision, Capital treatment for simple, transparent and comparable short-term securitisations, May
2018, www.bis.org/bcbs/publ/d442.htm.
33
National supervisors are provided with a national discretion to not implement the SEC-ERBA.
34
Basel Committee on Banking Supervision, Capital treatment of securitisations of non-performing loans, November 2020,
www.bis.org/bcbs/publ/d511.htm.

66 Basel III Monitoring Report February 2023

 The internationally-agreed date of implementation of the Basel III securitisation framework is
1 January 2018. According to the most recent Progress report on adoption of the Basel regulatory
framework, 35 in September 2022, 23 Committee member jurisdictions have implemented the Basel III
securitisation framework, including the member states of the European Union that introduced a transition
period until the end of 2019 allowing banks to use the Basel 2.5 framework for legacy exposures. In all
these jurisdictions except one the Basel III securitisation framework is also already in force. It is important
to highlight that this implementation assessment does not refer to the term and short-term STC criteria,
which are optional, and neither to the capital treatment of NPL securitisations.

Data description
A total of 88 banks submitted data of sufficient quality for securitisation, including 65 Group 1 banks and
23 Group 2 banks. The Group 1 sample represents 99.0% of total securitisation exposures of all banks.
Total securitisation exposures and RWA across Group 1 banks are €1.82 trillion and €412.1 billion
respectively, compared with €13.8 billion and €4.0 billion for Group 2 banks.

Data description Table 8

Group 1 banks Group 2 banks All banks

Number of banks 65 23 88
Exposure (EUR bn) 1,818.2 13.8 1,832.0
Exposure (% of total) 99.2 0.8 100.0
RWA (EUR bn) 412.1 4.0 416.1
RWA (% of total) 99.0 1.0 100.0
Source: Basel Committee on Banking Supervision.

Banks are included in the following analyses only if their data are complete and of sufficient
quality. Accordingly, some banks have been excluded from certain sections of the analysis. Hence, certain
results reported in the following sections reflect slightly different sample sizes. Even for banks included in
the sample, differences in how they complete the Basel III monitoring template could impact the
comparability of the results. The most material issue is the classification as STC or non-STC exposure, which
is detailed in Table 9 below.

Overview of securitisation exposures

Table 9 describes the aggregate securitisation exposure and its RWA according to the bank role, ie as an
originator of the securitisation transactions, investor, or sponsor. It should be noted that, while Table 9
presents aggregate figures, the breakdown of a jurisdiction’s overall exposure according to the role of the
bank differs significantly across jurisdictions, given the idiosyncrasies among securitisation markets and
varying business models among banks.

35
Basel Committee on Banking Supervision, Progress report on adoption of the Basel regulatory framework, October 2021,
www.bis.org/bcbs/publ/d525.htm.

Basel III Monitoring Report February 2023 67

 Bank role exposure amounts and RWAs1
In billions of euros Table 9

Originator Investor Sponsor Total

Exposure amounts 416.6 1,012.6 306.9 1,736.1
RWA 93.1 241.7 55.9 390.7
1
The sample consists of 95 banks.

Source: Basel Committee on Banking Supervision.

The Basel III securitisation framework distinguishes between STC and non-STC exposures,
providing preferential capital treatment to STC exposures. For this exercise, not all banks have performed
STC classification for their securitisation exposures, possibly due to the effort required to assess their
exposures against the STC criteria. 36 It is likely that some banks have applied a portfolio-wide classification,
assigning either all or none of their exposures as STC-eligible. Furthermore, some jurisdictions have not
implemented the Basel III securitisation framework or implemented it without the capital treatment for
STC securitisations, which is optional. Under this assumption, the majority of banks that reported no STC
exposures underestimate the actual amount of STC-eligible securitisation exposures and correspondingly,
overestimate the capital increase due to the implementation of the Basel III securitisation framework. The
share of STC-compliant securitisation exposures can be expected to increase as jurisdictions implement
the Basel III securitisation framework.

Number of banks per range of STC share Table 10

Share = 0% 0% < share 25% < share 50% < share 75% < share Share = 100%
≤ 25% ≤ 50% ≤ 75% < 100%
Total 42 15 9 7 6 9
Source: Basel Committee on Banking Supervision.

The Basel III securitisation framework also introduced a new hierarchy of three approaches (SEC-
IRBA, SEC-ERBA and SEC-SA) for calculating risk weights. Because of this hierarchy, it is expected that
banks have, in aggregate, a larger share of their securitisation exposures risk weighted by SEC-IRBA, then
SCE-ERBA and SEC-IAA, and then SEC-SA, whenever these exposures are available to the bank. Graph 57
shows the distribution of approaches for all banks in the sample.

36
To classify a securitisation exposure as STC, it must be analysed against a set of criteria that assess the risk of the underlying
assets, the securitisation’s structure, and risks associated with the securitisation’s servicers and other agents with a fiduciary
duty to the securitisation’s investors.

68 Basel III Monitoring Report February 2023

Securitisation exposure amounts by approach
All banks Graph 57

STC securitisations Non-STC securitisations

EUR bn EUR bn

600 600

500 500

400 400

300 300

200 200

100 100

0 0
IRBA ERBA IAA SA IRBA ERBA IAA SA Deduc- 1250%
tions1 risk
weight1
1
Note that deducted exposures and exposures subject to a 1250% risk weight are comparatively small but non-zero.

Source: Basel Committee on Banking Supervision. See also Table 11 and the Excel data file for underlying data and sample size.

Impact of the Basel III securitisation framework

Change in RWA for securitisation exposures

The sample of banks considered in this analysis is limited to the banks located in the jurisdictions that
have not yet implemented the final Basel III securitisation standards. For these banks, Table 11 presents
both the securitisation exposures and RWA using the current and final standards, broken down by risk
weighting approach. Only the non-STC information is shown due to insufficient sample size for STC data.
The expectation is that the exposure values remain broadly constant (reflecting the template reporting
instructions), while RWA would increase in line with the objectives of the securitisation standard reforms.
However, for individual rows it is possible that RWAs actually decrease, in particular for STC exposures. For
the same sample of non-STC exposure, the increase in the average risk weights applicable to exposures
under the Basel III securitisation frameworks as compared with the previous is 15.9% as shown in Table 11.
In terms of RWA density, the increase is from 26% to 30%. As the securitisation standard is almost fully
implemented the expected RWA impact from the remaining implementation is minimal.

Basel III Monitoring Report February 2023 69

 Total amounts and change of securitisations exposures and RWAs under the
current national rules and the final standards Table 11

Exposure RWA
Current Final Change Current Final Change
framework standards (%) framework standards (%)
(EUR bn) (EUR bn) (EUR bn) (EUR bn)
Non-STC securitisations: SEC-IRBA 304.8 304.8 0.0 70.5 75.2 6.6
Non-STC securitisations: SEC-ERBA 0.0 0.0 0.0 0.0 0.0 58.0
Non-STC securitisations: SEC-IAA 0.0 0.0 0.0 0.0
Non-STC securitisations: SEC-SA 370.0 370.0 0.0 101.4 124.0 22.3
Of which: resecuritisation 1.7 1.7 0.0 0.4 1.8 304.7
Non-STC securitisations: total 674.8 674.8 0.0 172.0 199.3 15.9
Others (1250% RW) 0.3 0.3 0.0 4.5 4.3 –5.2
Total 1
675.2 675.2 0.0 176.6 203.6 15.3
Sample size 13
1
Also reflecting STC securitisations.

Source: Basel Committee on Banking Supervision.

Graph 58 compares more directly the average risk weights between STC and non-STC exposures
under the Basel III securitisation framework. In line with the calibration of the parameters, the average risk
weights for non-STC exposures are expected to be higher than for STC exposures. The sample for this
graph consists of all banks with sufficiently good data, regardless of actual implementation status of the
Basel III securitisation rules. While the risk weight appears more than twice as high for total non-STC than
STC securitisations, the STC levels remain relatively very small as shown in Graph 57.

Average risk weight by approach, final standards1

All banks Graph 58

Per cent

25

20

15

10

0
IRBA ERBA IAA SA Total

STC securitisations Non-STC securitisations

1
Results for STC and non-STC securitisations refer to different exposures.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

70 Basel III Monitoring Report February 2023

4.3 Counterparty credit risk and credit valuation adjustment risk

4.3.1 Counterparty credit risk

In understanding overall MRC, counterparty credit risk (CCR) is part of credit risk capital requirements. This
section provides detailed analysis of the current and revised counterparty credit risk capital requirements.

Current rules for counterparty credit risk

Graph 59 shows the relative composition of counterparty credit risk capital requirements by exposure
calculation approach per bank group at end-June 2022. A significant number of banks in the sample use
standardised approaches (SA) to calculate CCR exposures. Amongst them, the SA-CCR is the most widely
used as a considerable number of jurisdictions have already implemented this new approach for
calculating SA exposures for derivatives, such as the European Union (as of end of June 2021), Canada and
the United States (as of June 2022). A large number of Group 1 banks use the internal model approach,
mainly the internal model method (IMM), to calculate CCR exposures for derivatives and securities
financing transactions (SFTs). Group 2 banks do not apply the IMM. In fact, all Group 2 banks use
standardised approaches to calculate CCR exposures. As of end-June 2022, for the 58 Group 1 banks in
the sample (of which 21 are using the IMM), CCR IMM capital requirements contribute 33.9% to total CCR
capital requirements. CCR capital requirements calculated using standardised approaches contribute
65.4% for these banks. For G-SIBs, 35.1% of total CCR capital requirements stem from capital requirements
calculated using the IMM. Other internal model methods (Repo-VaR and the comprehensive approach
using own estimates of haircuts) are generally used for smaller portions of exposures (0.7% for Group 1
banks).

Contribution to current CCR capital requirements by approach to EAD calculation

All banks Graph 59
Per cent

100

80

60

40

20

0
Group 1 banks Of which: G-SIBs Group 2 banks

Internal model method Other internal models Standardised approaches

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Overall impact of the revised minimum capital requirements for counterparty credit risk
This section shows the estimated impacts from the introduction of the revised minimum capital
requirements for counterparty credit risk. It reflects changes to the exposure calculation methodologies,
with the introduction of the standardised approach for counterparty credit risk (SA-CCR) published in
March 2014, the amendments to the comprehensive approach using supervisory haircuts (CA(SH)) and the
removal of the comprehensive approach using own estimates of haircuts (CA(OE)), published in December
2017. In addition, CCR capital requirements are affected by the changes to the credit risk framework that
impact the risk weights applied to CCR exposures. Both changes to the framework contribute to the impact

Basel III Monitoring Report February 2023 71

of CCR capital requirements. Generally, these changes lead to an increase in CCR capital requirements
under the revised framework relative to the current rules but in some cases, the impact is negative. For
some banks, the impact from changes in exposure and risk weight calculations offset each other so that
the overall impact is neutral.
A total of 84 banks, including 57 Group 1 banks, of which 19 G-SIBs, and 27 Group 2 banks are
included in the analyses regarding the revised minimum capital requirements for counterparty credit risk
for the end-June 2022 reporting date. The centre panel of Graph 60 shows the impact on CCR capital
requirements from the introduction of the revised CCR framework compared with the current CCR MRC.
Capital requirements for Group 1 banks and G-SIBs exhibit an average increase of 2.1% and 1.8%,
respectively. The average decrease for Group 2 banks is 4.7%, compared with –12.9% at end-December
2021. This effect can be largely attributed to the adoption of the SA-CCR methodology in the European
Union, along with the adoption of the SA-CCR in Canada and the United States as mentioned above. In
addition, there is a higher variability across Group 1 and Group 2 banks than there is for G-SIBs. The right-
hand panel of Graph 60 displays the impact of the CCR revisions on current overall MRC. Group 1 banks
and G-SIBs show a similar impact with an increase of 0.1% for Group 1 banks and the G-SIBs, while there
is no observed change for the Group 2 banks.
The left-hand panel of Graph 60 shows the impact on CCR exposures of the revised CCR
framework relative to the current framework. CCR exposures increase on average by 13.7% for Group 1
banks in the sample. The average impact is higher for the subsample of G-SIBs (18.9%), however for
Group 2 banks the CCR exposures increased by only 2.2% on average. Group 2 banks show a different
impact on exposures than Group 1 banks, likely due to the adoption of the SA-CCR methodology in the
European Union since most of the Group 2 banks are European banks.

Impact of revised CCR standards relative to current rules1

All banks Graph 60

Exposures Capital requirements relative to Capital requirements relative to

current CCR MRC current overall MRC
Per cent Per cent Per cent
^
150 150 10

100 100 5

50 50 0

0 0 −5

−50 −50 −10

−100 −100 −15

Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks

1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

One of the factors that drive the changes between the current standardised approaches and SA-
CCR is the treatment of margin collateral under the current rules (ie CEM or SM). In case banks currently
do not recognise the margin collateral, while they do take it into account under the SA-CCR, SA-CCR
exposures decrease significantly (sometimes leading to SA-CCR exposures and consequently capital
requirements close to zero). In cases where banks have already accounted for margin collateral under CEM,
banks see higher exposures due to the SA-CCR framework, with greater impacts if the banks’ positions are
more material in risk classes that are more significantly impacted by the SA-CCR framework. Changes in

72 Basel III Monitoring Report February 2023

the credit risk framework can amplify these impacts. Haircuts will change for SFTs currently capitalised
under CA(SH), and CA(OE) will be removed from the framework. Some banks are not affected by the more
conservative supervisory haircuts in the revised CA(SH), but others see their SFT exposures (and hence
capital requirements) increase significantly. In addition, some banks report significant increases in SFT
exposure values due to the application of the SFT minimum haircut floor, which adds to the increase
stemming from the amended haircut values in the Comprehensive Approach.
Graph 61 shows the average and median impacts of the revised CCR capital requirements relative
to the current ones for a balanced data set of 21 Group 1 banks (of which seven G-SIBs) and five Group 2
banks. The impact for Group 1 banks averages between 8.8% (end-December 2021) and 31.4% (end-
December 2020). The average impact for G-SIBs ranges between 7.5% (end-December 2021) and 35.2%
(end-December 2020). For the Group 2 banks the impact ranges between 17.2% (end-December 2021)
and 70.6% (end-June 2018). The impact of the changes to the framework is on average higher for Group 2
banks than for Group 1 banks and G-SIBs.

Impact of total revised CCR capital requirements relative to current across time
Balanced data set Graph 61

Per cent

60

40

20

−20
2019 2020 2021 2022

Group 1 weighted average G-SIBs weighted average Group 2 weighted average

Group 1 median G-SIBs median Group 2 median

Since the Committee did not collect these data through its Basel III monitoring exercise for the end-June 2020 reporting date, results for
H1 2020 show the same values as for H2 2019.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.3.2 Credit valuation adjustment risk

Current rules for credit valuation adjustment risk

The sample for the analysis of the CVA risk component consists of 82 banks, including 64 Group 1 banks,
of which 25 G-SIBs, and 18 Group 2 banks.
The left-hand side of Graph 62 shows that under the current rules, the average share of CVA
capital requirements in total MRC is 1.9% for Group 1, 2.1% for G-SIBs and 1.2% for Group 2 banks. For G-
SIBs the current share of CVA capital requirements is not more than 3.3% for 75% of these banks.
The right-hand side of Graph 62 displays for a balanced data set of 22 Group 1 banks (thereof 12
G-SIBs) and three Group 2 banks the average share of current CVA capital requirements relative to total
MRC over time. Within this sample of banks, Group 2 banks report the highest average share of CVA capital
requirements in total current MRC. Only for the end-December 2020 reporting date, the share is higher
for G-SIBs than for Group 2 banks. The average share of CVA capital requirements in total MRC for Group 1
banks is consistently slightly lower than or equal to the one for G-SIBs across time. Variations across the

Basel III Monitoring Report February 2023 73

different exercises are comparable for both Group 1 banks and G-SIBs. Except for the drop for the end-
December 2021 exercise, Group 2 banks show only little variation across time. Group 2 banks exhibit a
tendency for decreasing capital requirements across time. However, due to the restriction of the analysis
to a sample of banks which reported consistent data across all exercises in scope, results are based only
on the observations of three banks. CVA capital requirements under current rules for this sample of banks
remains relatively unaffected across time. The increase in absolute CVA capital requirements drives the
increase of the relative share of CVA capital requirements in total MRC for the end-December 2020 data,
causing the peak observed for Group 1 banks and G-SIBs. For end-June 2021 numbers have decreased to
a level similar to end-December 2019 again.

Share of CVA capital requirements in total MRC under the current rules Graph 62

Distribution by bank group1 Development over time, balanced data set

Per cent Per cent

12 4

9 3.5

6 3

3 2.5

0 2
Group 1 banks Of which: G-SIBs Group 2 banks 2019 2020 2021 2022

Group 1 banks Of which: G-SIBs Group 2 banks

1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Overall impact of the revised minimum capital requirements for credit valuation adjustment risk
This section discusses the estimated impacts from the introduction of the revised minimum capital
requirements for credit valuation adjustment (CVA) risk including the targeted revisions to the framework
published in July 2020. 37
The sample includes 15 banks that currently apply the advanced method for CVA (A-CVA), of
which 13 indicate to use the standardised approach for CVA (SA-CVA) under the revised framework. The
other two banks indicate to be using the reduced and full BA-CVA under the revised framework,
respectively. The 68 banks that currently apply only the standard method for CVA (S-CVA) include 11 banks
that indicate to intend to apply the SA-CVA and 49 banks that indicate to move to the reduced basic
approach for CVA (reduced BA-CVA) under the revised framework. Overall, only nine banks in the sample
indicate to use only the full basic approach for CVA (full BA-CVA) in the future.
The left-hand side panel of Graph 63 shows that the average impact when moving to the revised
CVA framework in relation to current CVA MRC shows a decrease by 5.8% for Group 1 banks. Group 2
banks report a much higher average impact with an increase of 35.0%. The average impact for G-SIBs is a
decrease by 4.3%, which is slightly lower than the one for Group 1 banks. The variability in results is
significant, though. Some banks report decreasing capital requirements when moving to the revised CVA
framework (with CVA capital requirements decreasing up to as much as 66.9%) whereas other banks report

37
See Basel Committee on Banking Supervision, Targeted revisions to the credit valuation adjustment risk framework, July 2020,
www.bis.org/bcbs/publ/d507.htm.

74 Basel III Monitoring Report February 2023

significant increases in the CVA capital requirements relative to the current standards (up to about 536%
of the current capital requirements). Very high increases appear more frequently for banks using S-CVA
that are planning to use the reduced BA-CVA. This is explained by the combination of the increase in
exposures from the application of the SA-CCR and the higher risk weights in the BA-CVA compared with
the current standardised approach. Capital requirements under the reduced BA-CVA are 3.6% higher than
capital requirements under the current S-CVA for the median bank.
The right-hand side panel of Graph 63 provides the impact of the revised CVA capital
requirements relative to current overall MRC. Given the small share of CVA capital requirements in overall
MRC for most banks, the average impact of the CVA revisions on overall MRC is approximately -0.1% for
Group 1 and 0.4% for Group 2 banks. Overall, the impact ranges between -3.2% and 5.0% for all banks in
the sample.

Impact of revised CVA capital requirements compared with current rules1 Graph 63

Relative to current CVA MRC Relative to current overall MRC

Per cent Per cent
^ ^
400 4

300 2

200 0

100 −2

0 −4

−100 −6
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks

One Group 1 bank in the sample provided CVA data but no data on current overall capital requirements. It is therefore excluded from the
right-hand panel. 1 See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 64 shows that results differ across regions. The average impacts to current CVA MRC are
comparable across regions, with -8.1% for Europe, -5.2% for the Americas and -2.8% for the rest of the
world. However, the variability of results differs significantly across regions and individual countries. In
some countries, all banks show comparable impacts, and in others, large increases due to the differences
in the methodology between the current and revised CVA frameworks can be observed. The average
impact of the revised CVA capital requirements relative to current overall MRC demonstrated a slight
decrease of 0.2% for Group 1 banks in Europe and the Americas and no change in the rest of the world.

Basel III Monitoring Report February 2023 75

Impact of revised CVA capital requirements compared with current rules, by
region1
Group 1 banks Graph 64

Relative to current CVA MRC Relative to current overall MRC

Per cent Per cent
^
400 6

300 4

200 2

100 0

0 −2

−100 −4
Europe Americas Rest of the world Europe Americas Rest of the world

One bank in the sample provided CVA data but no data on current overall capital requirements. It is therefore excluded from the right-hand
panel. 1 See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 65 shows the average impact on CVA capital requirements under the revised framework
compared with the current rules across time for a balanced data set of 22 Group 1 banks (thereof 12 G-
SIBs) and three Group 2 banks. The observed impacts for Group 1 banks reduce from 85.4% in end-
December 2018 to 25.2% in end-June 2019. For the end-June 2020 data, the impact shows an average
increase of 38.3% for Group 1 banks with a huge drop to an impact of -26.5% at the end of December
2020 due to the effects of the recalibration to the revised CVA framework. The end-June 2021 data show
a decrease in CVA capital requirements of 8.9% when moving to the revised framework. The impacts for
Group 2 banks CCR show an increase in capital requirements under the revised rules, but at much lower
levels after the recalibration.

Impact of total revised CVA capital requirements relative to current across time
Balanced data set Graph 65

Per cent

150

100

50

−50
2019 2020 2021 2022

Group 1 banks Of which: G-SIBs Group 2 banks

Since the Committee did not collect these data through its Basel III monitoring exercise for the end-June 2020 reporting date, results for
H1 2020 show the same values as for H2 2019.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

76 Basel III Monitoring Report February 2023

4.4 Market risk

4.4.1 Current market risk rules

The left-hand panel of Graph 66 shows the distribution of the share of minimum market risk capital
requirements in total MRC under the current rules, ie jurisdiction-specific Basel 2.5 implementations. The
weighted average share of market risk MRC is 3.9% of total MRC for Group 1 banks and 2.0% of total MRC
for Group 2 banks. However, there is significant dispersion in shares of MRC from 0% to over 37%.
As seen in the trends starting in 2011, shown in the right-hand panel of Graph 66, the latest
upturn in the share of market risk was likely due to increased value-at-risk (VaR) estimates driven by higher
market volatility in response to the war in Ukraine and the significant central banking tightening cycle that
commenced in the first half of 2022. This upturn follows the downturn from the initial spike in the first half
of 2020 following historic low levels at year-end 2019. As of June 2022, the contribution from market risk
for Group 1 banks and G-SIBs trended up from the year-end 2021 levels to around 4.8% and 5.4%
respectively. Group 2 banks saw the share from market risk unchanged at 1.1%. The increases in the share
of market risk were driven by VaR numbers rising due to the higher volatility being incorporated into
banks’ models’ lookback windows and, in the case of some banks, surcharges due to excessive VaR
breaches.
Even with the latest uptick in market risk capital requirements, the drop over the longer-term
trend is most pronounced for Group 2 banks, which have seen their relative capital requirements attributed
to market risk decline by more than 60% since the peak in 2014 although from lower contribution levels.
As of June 2022, the average share for Group 1 banks and G-SIBs was around the same level as that seen
at end-June 2011 even after the most recent spike in volatility. However, data from 2011 should be viewed
in light of the fact that many jurisdictions implemented Basel 2.5 beginning in 2012, so the 2011 numbers
were reflective of the prior Basel II standards that resulted in significantly lower capital requirements.
Group 2 banks’ average share of market risk MRC as of June 2022 is about half the level at the beginning
of the time series after experiencing a peak of 2.8% in 2014.

Share of market risk MRC in total MRC under the current rules Graph 66

Distribution1 Development over time

Per cent Per cent

40 10

30 8

20 6

10 4

0 2

−10 0
Group 1 banks Of which: G-SIBs Group 2 banks 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Group 1 banks Of which: G-SIBs Group 2 banks

1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 67 below shows time series decompositions of reported market risk MRC by sub-
components since end-June 2015. For Group 1 banks and the G-SIBs among them, the internal models
approach (IMA) contributed 74.8% and 83.9% of overall market risk MRC respectively as of the second
quarter of 2022. This contribution from IMA was somewhat higher than as of year-end 2021, due to banks’

Basel III Monitoring Report February 2023 77

VaR estimates increasing in response to higher market volatility, which was driven by the war in Ukraine
and central bank tightening.
Since 2015, the share of overall market risk MRC composed of VaR and stressed VaR (SVaR) has
generally increased over time while the MRC shares of both the incremental risk capital charge and
correlation trading portfolios (CTPs) has generally decreased. The first half of 2022 saw a small drop in the
contribution from CTPs for both G-SIBs and Group 1 banks with both cohorts seeing CTPs make the
second smallest contribution since our time series began in June 2015.
For Group 2 banks, the IMA is less relevant, composing around 38.8% of market risk MRC. The
contribution from CTPs of 1.1% is relatively negligible for Group 2 banks although their share has increased
by nearly fourfold since 2015.

Components of MRC for market risk under the current rules

Unbalanced data set, in per cent Graph 67

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

100 100 100

80 80 80

60 60 60

40 40 40

20 20
20

0 0
0
2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 2022
2016 2017 2018 2019 2020 2021 2022
Standardised approach: Internal models approach:
General position risk VaR and stessed VaR Correlation trading portfolios
Specific position risk Incremental risk charge Other and unassigned
FX and commodity risk Unassigned
Unassigned

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 68 below shows the ratio of the 10-day 99th percentile stressed VaR to the current 10 day
99th percentile VaR under current market risk rules using two sets of balanced data from Group 1 banks.
The left-hand panel shows the time series since end-2011 for 22 banks. Under this longer-run balanced
data set, for the initial several years, the ratio of stressed VaR to VaR fluctuated around 200% with a local
peak at 236% in end-June 2014 and a second peak at end-December 2019 of 280%. However, the ratio
has subsequently recovered to a new a time-series high of 382% as of year-end 2021 before dropping
again in the first half of 2022 to 228.4%.
The right-hand panel of Graph 68 shows the same ratio for a shorter-run balanced data set
including banks that have provided data since 2015. For this larger sample of overall 44 banks, the ratio
has generally increased, reaching its pre-pandemic peak at end-June 2018 at 276% before dropping by
nearly half below 155% as of end-June 2020 and subsequently rebounding to a new high above 349% as
of year-end 2021 and subsequently falling to 233.7% as of June 2022.
VaR models are typically based on a fixed backwards-looking period, such as one year, that rolls
forward over time. In contrast, SVaRs are based on historical high volatility stress periods, such as the 2008
global financial crisis, that typically change infrequently. In both time series, the increasing trend prior to
the outbreak of Covid-19 can be attributed at least partially to the lower volatility environment that had

78 Basel III Monitoring Report February 2023

been observed in the markets over the several years preceding the Covid-19 pandemic, which reduced
VaR without reducing SVaR. The pandemic-related volatility experienced in markets in the first quarter of
2020 increased banks’ VaRs substantially more than their SVaRs. This led the SVaR/VaR ratio to decline
significantly across the banks. Thus, as banks’ current VaRs fall in low volatility periods, the ratio becomes
elevated. However, the huge increase in volatility seen during March 2020 with the onset of the Covid-19
pandemic reversed this trend, sending the ratio as of June 2020 to its lowest level since 2014 for the smaller
sample and to the lowest level since the start of the time series in 2015 for the larger sample. 2021 was
much more stable than even the pre-pandemic period due in part to the extraordinary official sector policy
responses to the pandemic across the globe. This effect, combined with the fact that the one-year lookback
periods no longer included the volatility seen in March 2020, led to the ratio reaching new highs across
both samples at year-end 2021. As mentioned above, 2022 has seen a return of volatility across all risk
classes due to the war in Ukraine and its impact on energy, grain and metals markets, the tightening cycle,
a bear market in equities from the record levels seen around the new year of 2022 and considerable
movements in foreign exchange as the US dollar appreciated to levels not seen in 20 years. These
developments corresponded with the largest drops in the SVaR/VAR ratios observed since both time series
began.

Stressed value-at-risk in relation to current value-at-risk

Group 1 banks, balanced data set Graph 68

Banks reporting since end-2011 Banks reporting since June 2015

Per cent Per cent

350 350

300 300

250 250

200 200

150 150
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2015

2016

2017

2018

2019

2020

2021

2022
Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.4.2 Overall impact of the revised minimum capital requirements for market risk
Basel III monitoring market risk data tend to be more variable both over time and across reporting banks
than that of other areas of the Basel III monitoring exercise owing to the short term and ever-changing
nature of trading portfolios when compared with banking book portfolios, which are mostly held-to-
maturity or revolving. In addition, while improving in data quality with each collection, the Basel III
monitoring estimates for market risk under the final market risk standard are less robust than those which
banks make for the banking book as the impact estimates still require significant manual intervention for
many trading positions at banks that have yet to develop systems reflecting their local implementations.
Although prior collections included banks’ estimates of the capital impact of the final standard, the
additional time resulting from the pandemic-related delay in implementation target days has allowed
banks to refine their calculations which might have generally improved the accuracy of their estimates.
The impact estimates below generally show impacts based on banks’ current portfolios and the
current set of modelled desks. They should not reflect potential changes to their portfolios or to the scope
of model-approved trading desks upon implementation of the final standard. This methodology likely

Basel III Monitoring Report February 2023 79

overstates the ultimate impact subsequent to implementation, as banks may reduce their exposures to
positions with high capital requirements and modify the set of modelled desks. In the other direction,
these impacts do not reflect the consequences of trading desks potentially failing backtesting or P&L
attribution tests (PLATs) based on the banks’ submitted desk-level VaR and P&L data. This assumption
understates impact for IMA banks since the new tests are very stringent and we expect desk-level
performance to lead to fewer desks passing and being able to use IMA for capital calculations compared
with the current standard. It is not clear which of these countervailing effects will dominate, although we
do generally expect market risk capital requirements to increase significantly.
A total of 98 banks from 22 jurisdictions provided at least some market risk data as of the end-
June 2022 reporting date including 83 Group 1 and 15 Group 2 banks respectively. Of these banks, 49
banks provided data sufficiently complete to estimate the overall impact from the revised market risk
framework.
Graph 69 below shows the revised market risk standards’ impact versus current market risk capital
and total capital requirements. The prospective Basel III market risk capital requirements relative to current
market risk capital requirements increase by 37.9% for the median Group 1 bank, and by 48.9% for the G-
SIB cohort, while Group 2 banks saw a 12.5% drop in their median. The weighted average expected
increase was 50.6%, 56.5% and 3.5% for Group 1 banks, G-SIBs and Group 2 banks, respectively. There is
wide variability at the bank level. Outliers are far more extreme ranging from a near quadrupling in capital
requirements (+362.6%) at a non-G-SIB Group 1 bank, to a more than four-fifths reduction (-90.6%) at a
Group 2 bank. This is the third consecutive collection in which we have seen the median Group 2 bank
show an expected drop in minimum required capital related to the implementation of the final market risk
standard.
As a portion of the banks’ overall capital requirement (MRC) rather than only market risk capital
requirements, the revised standards result in a much more modest median increase of 1.2% for Group 1
banks, 2.2% for the G-SIB cohort and a drop of 0.2% for Group 2 banks. On a weighted average basis, all
three groups saw increases in market risk’s contribution to total capital of 1.8%, 1.9% and 0.1% respectively.

Impact on MRC of the revised standards for minimum capital requirements for
market risk1 Graph 69

Relative to current market risk capital requirements Relative to current overall capital requirements
Per cent Per cent

400 20

300 15

200 10

100 5

0 0

−100 −5
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks
1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 70 decomposes the total market risk capital requirements under the current rules and
under the revised standards. The breakdown includes components due to the standardised approach (SA)
and internal models approach (IMA), and further breaks them down into their sub-components for the
revised standards.

80 Basel III Monitoring Report February 2023

 Group 1 banks expect their share of standardised approach capital requirements to increase from
37.4% to 52.9%. For Group 2 banks, the share of their standardised approach capital requirements is
expected to increase only marginally from 74.7% to 77.9%.
For positions subject to the revised standardised approach, for Group 1 banks, 65.2% of the
standardised approach capital requirement are expected to be attributed to the sensitivities-based
method (SbM). For Group 2 banks, the share of the SbM is 86.3%. The default risk capital (DRC)
requirement contributes 28.8% and 12.4% to the total standardised approach capital requirements for
Group 1 and Group 2 banks, respectively. The residual risk add-on (RRAO), which accounts for risks not
fully covered by the SbM or the DRC (including risks related to exotic derivatives and instruments
containing gap risk, correlation risk and behavioural risks including prepayment risk), contributes 6.0% to
the standardised approach capital requirement for Group 1 banks and almost 1.3% for Group 2 banks’ SA
capital requirement.
With respect to the revised IMA, the capital requirement for modellable risk factors would
contribute 39.8% to the total internally-modelled capital requirements (modellable, non-modellable risk
factors and DRC) for Group 1 banks and 41.0% for Group 2 banks. The corresponding share of capital
requirements from non-modellable risk factors is 35.4% and 22.7%, respectively. Finally, the DRC for
internal models is expected to contribute 24.8% for Group 1 banks and 36.2% for Group 2 banks’ IMA
capital requirement.

Breakdown of MRC for market risk by approach and risk component under the
current rules and the revised standard Graph 70

Current framework Revised framework

Per cent Per cent

100 100

80 80

60 60

40 40

20 20

0 0
Group 1 banks Of which: G-SIBs Group 2 banks Group 1 banks Of which: G-SIBs Group 2 banks

Standardised approach Standardised approach Internal models approach

Internal models approach Sensitivities-based Modellable risk factors
Other method Non-modellable
Residual risk add-on risk factors
Default risk capital Default risk capital
requirement requirement

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.4.3 Revised model validation tests

Beginning with this collection, bank’s requirement to populate the desk level VaR and profit and loss data
necessary to test their performance against the VaR back tests and PLATs was moved from a semi-annual
to an annual basis. Thus, we did not collect the data as of June 2022. The Committee will resume testing
banks’ desk-level performance with the next data collection with as of end-December 2022.

Basel III Monitoring Report February 2023 81

4.5 Operational risk

4.5.1 Current operational risk rules

MRC for operational risk of Group 1 banks increased until end-2016 and levelled-off since then. The share
of operational risk MRC as a percentage of total MRC is also declining; it is currently 11.3% for Group 1
banks and 12.8% for G-SIBs (see Graph 73).
The evolution of losses over the past 10 years is depicted in Graph 72. MRC for operational risk
first increased with increasing losses, yet as losses have started to decline it has stabilised in recent years.
In total, €522.6 billion of gross and €470.8 billion of net operational risk losses have been reported over
the past 10 years. Operational risk gross losses were €70.5 billion in 2012 and peaked in 2014 at €81.0
billion. Since then, gross losses have decreased significantly to €29.5 billion in 2021, the lowest value of
the past 10 years. This trend was observed in 2021 despite the Covid-19 pandemic.
The time-lagged impact of the financial crisis on banks’ profits, notably due to long-standing
lawsuits, appears to be nearly completed. Nevertheless, banks still face risk due to the digitalisation that
amplifies IT risk, potential afterpains of the Covid-19 pandemic or the war in Ukraine with its
imponderabilities that could, for example, increase legal risks.
For Group 1 banks and G-SIBs, most of which use the Advanced Measurement Approach (AMA)
as the primary method for calculating operational risk capital, the increase in the first half of the 2010s is
largely explained by the surge in the number and severity of operational risk events during and after the
financial crisis. For Group 1 banks as a whole, this resulted in a significant increase of total MRC for
operational risk and an increasing share of MRC for operational risk under the AMA from 60.2% in 2011
to about 71.1% at end-June 2017. On the other hand, AMA banks benefit from recently decreased losses
which resulted in stable MRC for operational risk despite an increasing business volume. This development
explains the lower share of MRC for operational risk under the AMA of currently 59.8% and the increasing
share of the indicator-based approaches.
The increase in MRC for operational risk for Group 2 banks, most of which calculate operational
risk capital requirements under the framework’s non-model-based approaches, 38 is largely due to an
increase in business volume, a factor captured by the financial statement-based components of the
standardised approaches. For Group 2 banks, the share of operational risk MRC as a percentage of total
MRC is 10.5%.

38
These comprise the Basic Indicator Approach (BIA), the Standardised Approach (TSA) and its variant, the Alternative
Standardised Approach (ASA).

82 Basel III Monitoring Report February 2023

Total MRC for operational risk and share of approaches
Balanced data set Graph 71

Group 1 banks1 Group 2 banks

June 2011 = 100 Per cent June 2011 = 100 Per cent

300 100 300 100

250 80 250 80

200 60 200 60

150 40 150 40

100 20 100 20

50 0 50 0
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022
Standardised approach Advanced measurement approach
Basic indicator approach Total operational risk MRC (lhs)
Alternative standardised approach
1
Some banks started reporting operational risk RWAs under the Basic Indicator Approach in 2013 and eventually migrated to the
Standardised Approach in 2014.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Loss evolution over the past 10 years

All banks, exchange rates as of the current reporting date Graph 72

EUR bn

80

60

40

20

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Net losses Gross losses

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

The dominance of indicator-based properties found in the standardised approaches for

operational risk reflects the size or business volume of a bank rather than its risk exposure, explaining the
lower variance of MRC for most Group 2 banks (see Graph 73). For Group 2 banks, the difference between
the 25th and 75th quantiles of the share of MRC for operational risk in total MRC is 5.6 percentage points.
Although the difference of 5.4 percentage points for Group 1 banks is similar, the difference for G-SIBs
(15.3 percentage points) is significantly higher. This observation in combination with the weighted average
(11.3% for Group 1 banks and 12.8% for G-SIBs) being significantly higher than the median (9.1% for
Group 1 banks and 11.3% for G-SIBs) indicates a positive correlation between size and an above average

Basel III Monitoring Report February 2023 83

operational risk profile. The outliers among Group 2 banks are mostly fee business-specialised banks
where operational risk is largely an exclusive risk, while outliers among Group 1 banks and G-SIBs are
banks that use AMA where past loss events influence future operational risk exposure.

Distribution of share of MRC for operational risk in total MRC1 Graph 73

Per cent

80

60

40

20

0
Group 1 banks Of which: G-SIBs Group 2 banks
1
See Section 1.3.3 for details on box plots.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

4.5.2 Final operational risk standards

The objective of the design and calibration of the revised operational risk framework is to ensure stable
capital requirements that are simple to estimate and comparable while remaining risk-sensitive. The
revisions aim to accomplish this objective by replacing the existing set of approaches 39 used for the
estimation of operational risk capital requirements with the standardised approach. The standardised
approach is comprised of a single non-model-based method that combines a financial statement proxy
of operational risk exposure (termed the “business indicator” or BI) with bank-specific operational risk-
related losses (termed the “internal loss multiplier” or ILM). The following analysis applies the standardised
approach to estimate the changes in operational risk MRC and evaluates the impact of the final against
the existing framework. It also considers two national discretions: (1) to set the internal loss multiplier
equal to one and hence base capital requirements for operational risk solely on the business indicator
component for all banks in a jurisdiction; and (2) to have Bucket 1 banks measure their ILM using their loss
history, rather than apply ILM = 1 to all Bucket 1 banks. 40
According to Table 12, the final operational risk framework generates an aggregate small increase
in operational risk MRC of approximately 0.9% for all Group 1 banks. Nevertheless, G-SIBs will benefit from
a decrease of -4.6% while an increase of 14.0% for the Group 2 banks in the sample is observed. While
Europe faces a significant increase of around 40%, the Americas (-6.3%) and the rest of the world (-15.7%)
experience significant decreases. This impact is observed with most banks indicating the application of the
risk-sensitive ILM feature.
However, if all banks used the less risk-sensitive BI component only (“ILM=1”, shaded brown in
Table 12), the operational risk MRC for Group 1 banks would decrease by -4.2% and -12.0% for G-SIBs.
This indicates that the past losses due to the financial crisis would still have a measurable impact on
possible MRC. If all Group 1 banks applied the ILM based on the average losses above €20,000 of the past

39
Comprised of the basic indicator approach (BIA), the standardised approach (TSA) and its variant, the alternative standardised
approach (ASA), along with the internal model-based advanced measurement approach (AMA).
40
This has been reflected in the calculation by setting the internal loss multiplier to one whenever national supervisory authorities
have indicated that they will most likely apply the national discretion.

84 Basel III Monitoring Report February 2023

10 years (“20k 10Y”, shaded green in Table 12), the impact would be 5.8% and -1.2% for G-SIBs, indicating
that losses from the financial crisis still push the MRC. The comparison between ILM=1 and ILM 20k on a
regional level shows that the MRC in Europe (delta of 49.2 percentage points) and the Americas (delta of
22.3 percentage points) – those regions most affected by the operational risk losses during the financial
crisis – would still face MRC increases due to these past losses, while the low loss experiences in the rest
of the world would (delta of -34.9 percentage points) result in significant discounts.
Nevertheless, given the decreasing trend of losses and the fading out of the financial crisis losses
in the upcoming years (see Graph 72), the MRC impact at the time of first implementation of the final
Basel III framework may be overestimated due to the risk-sensitive feature of the ILM. In case that the
current average losses above €20,000 remain the same as the past five years, the impact for Group 1 banks
could drop to -4.2% (-14.1% for G-SIBs), which would be a similar result as for ILM=1. In case that even
the average losses of the past three years remain, the MRC would decrease by -6.8% (-16.3% for G-SIBs).
From this decreasing trend in MRC, Europe and the Americas – the most affected regions – would benefit
most but starting from a much higher MRC level.
As the impact described above is based on data without possible loss exclusion for losses not
relevant anymore for a bank’s risk exposure, and without any possible correction of the business indicator
(eg due to divested activities, mergers or acquisitions), the real impact might further be over- or
underestimated. A deeper look into possible loss exclusions and BI adjustments 41 reported by banks shows
that the capital impact might be significantly lower as the impact for ILM=1. It decreases to -9.7% (-16.8%
for G-SIBs), which is around than five percentage points less than without any BI adjustment (see column
“ILM=1, corrected”, shaded brown). Also, with consideration of loss exclusions, the impact is 1.9% for
Group 1 banks –four percentage points lower than without loss exclusions (see column “20k 10Y net,
corrected BIC”, shaded green). Nevertheless, as the decreasing effect is a bit lower compared with the
ILM=1, it seems that BI adjustments could become slightly more important than loss exclusions.
Finally, it should be noted that the results exclude current supervisory-imposed capital add-ons
under Pillar 2 for certain banks in the sample that would otherwise cause the impact of the reforms to the
operational risk framework on MRC to be lower compared with current MRC levels for the Group 1 bank
sample. Given that some of these Pillar 2 capital requirements may be removed or reduced, the size of the
increases in MRC shown in Table 12 may be overstated and reductions may be understated.

Changes in MRC for operational risk

In per cent Table 12

With chosen ILM=1 20k 100k 20k 20k ILM=1, 20k 10Y net,
approach 10Y 10Y 5Y 3Y corrected corrected BIC
Group 1 banks 0.9 –4.2 5.8 4.0 –4.2 –6.8 –9.7 1.9
Of which: Europe 40.0 13.2 62.4 58.8 41.3 33.7 12.8 60.1
Of which: Americas –6.3 –28.6 –6.3 –7.8 –20.6 –20.4 –29.1 –6.8
Of which: RW –15.7 19.3 –15.6 –16.5 –11.8 –14.8 3.2 –25.7
Of which: G-SIBs –4.6 –12.0 –1.2 –2.7 –14.1 –16.3 –16.8 –4.5
Group 2 banks 14.0 –1.1 15.0 8.6 18.4 17.4 –1.4 14.5
Source: Basel Committee on Banking Supervision.

41
As the new standardised approach is not yet applied in any of the jurisdiction that take part in this exercise, it is still possible
that the reported corrections do not reflect the full potential of adjustments as these are used just at the time when banks must
apply the rules. Nevertheless, the adjustment possibilities already reported indicate that the real impact is over- rather than
underestimated.

Basel III Monitoring Report February 2023 85

 With Graph 74 it is possible to explain the effect of differences in the evolution in BIC and LC on
the impact on the final MRC of the new standardised approach for operational risk. Especially the
decreasing losses since 2015 as shown in Graph 72 might change the interaction between BIC and LC. To
make numbers comparable without showing confidential data, the values are converted to a fraction of
the reported 2021 operational risk MRC. The analysis comprises a balanced set of 66 banks, 28 of them are
AMA banks.
For AMA banks, the left-hand panel of Graph 74 shows that the business-driven BIC is constantly
growing from 67.6% in 2017 to 72.9% in 2021 (a change of +8%), only interrupted in the 2020 pandemic
year. On the other hand, the loss component was more or less stable till 2019 and decreases since then.
Despite the decreasing losses since 2015, the loss component could not directly decrease as till 2019, pre-
financial crisis low-loss years were just replaced by similar low-loss years after 2014. This changes 2020, as
high-loss years triggered by the financial crisis started to be replaced by the lately observed low-loss years.
This caused a quick decrease of the loss component from its peak of 266.5% in 2018 by about 16% to
224.2% in 2021. This trend might continue for some further years as still high-loss years of the financial
crisis affect the loss component of many AMA banks. These high-loss years can be replaced if the lately
observed trend of low-loss years continues.
Although the loss component decreases faster than the BIC increases, the final MRC of the new
SA is still increasing by about 3% over the past five years as due to the logarithm feature of the ILM, the
loss component has only a diminished impact. This diminishing effect is even stronger for banks whose
loss component is significantly higher than the BIC. This is currently true for Group 1 banks, whose loss
component is about three times higher than the BIC in 2021. The average ILM in such a case is about 1.4
and is reflected in the difference between 72.9% BIC and 99.7% 20k new SA. This ratio is already
significantly lower as in 2017 when the loss component to BIC ratio was about 3.9. Nevertheless, despite
the fade out of losses in the 10-year window, they still drive the new SA capital requirements and even the
current AMA MRC. If these banks would use the Basic Indicator Approach instead of the AMA (hypothetical
BIA), the current MRC in 2021 would be 62.2%, ie about 38% lower than with the current AMA which is by
definition 100%.
A different picture can be observed for the non-AMA Group 1 banks presented in the right-hand
panel of Graph 74. The hypothetical BIA is about 6% higher than current MRC, which indicates that these
banks use a less conservative approach to measure their risk exposure and benefit from the use of the
current indicator-based approaches of BIA, ASA and SA. Furthermore, the BIC and the loss component
change almost with the same rate. While the BIC increased from 99.8% to 122.1%, which is by about 22%,
the loss component increased by about 25% from 125.4% in 2017 to 157.2% in 2021. 42 Thus, for non-AMA
banks, which are usually smaller Group 1 banks, a phase-out of financial crisis losses cannot be identified.
This can be explained as these banks did not experience high losses after the financial crisis and thus have
a loss component similar to the BIC. The ratio between loss component and BIC for these banks is only 1.3
in 2021, leading to an ILM of about 1.08 on average.

42
Differences in the hypothetical BIA show that the values of non-AMA banks and AMA banks cannot be compared easily.
Although the financial crisis losses in 2021 with the loss component of 157.2% for non-AMA banks seems to be not that
different from 224.2% for AMA banks, they are twice as high for AMA banks if the loss component values are divided by their
hypothetical 2021 BIA (62.2% for AMA and 106.5% for non-AMA banks). With this further adjustment, the value for AMA banks
at 379.0% would be more than twice as high as for non-AMA banks with 172.7%.

86 Basel III Monitoring Report February 2023

Evolution of new SA components Graph 74

Group 1 AMA banks Group 1 non-AMA banks

Per cent of 2021 op risk MRC Per cent of 2021 op risk MRC Per cent of 2021 op risk MRC Per cent of 2021 op risk MRC

280 110
160 160

140 140
260 90

120 120

240 70
100 100

220 50 80 80
2018 2019 2020 2021 2018 2019 2020 2021

reported operational risk MRC BIC 20k LC (lhs) hypothetical BIA

20k new SA

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 75 depicts the distribution of changes in operational risk capital requirements for Group 1
banks, G-SIBs and Group 2 banks that calculate operational risk capital requirements using the existing set
of standardised and advanced approaches in the framework.

Changes in MRC for operational risk1 Graph 75

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent
^ ^
150 150 150

100 100 100

50 50 50

0 0 0

−50 −50 −50

−100 −100 −100

Total AMA not AMA Total AMA not AMA Total AMA not AMA
1
See Section 1.3.3 for details on box plots. For the purpose of this graph, AMA banks are banks that currently calculate some part of their
operational risk capital requirements using the AMA.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Basel III Monitoring Report February 2023 87

5. Interactions between risk-based, output floor and leverage ratio
capital requirements

5.1 Relationship between the Basel III leverage ratio and risk-based capital
requirements under fully phased-in initial Basel III standards

Graph 76 below shows the interaction between the fully phased-in Basel III Tier 1 leverage ratios
(horizontal axis) and the fully phased-in Basel III Tier 1 risk-weighted capital ratios (vertical axis). Ratios of
Group 1 banks are marked with red dots and those of Group 2 banks with blue dots. The dashed horizontal
line represents a Tier 1 target risk-based capital ratio of 8.5%, 43 whereas the dashed vertical line represents
a Basel III Tier 1 leverage ratio of 3%.
The diagonal line represents points where an 8.5% fully phased-in Basel III Tier 1 target risk-based
capital ratio results in the same amount of required fully phased-in Basel III Tier 1 capital as a fully phased-
in Basel III Tier 1 leverage ratio of 3%. By construction, it also represents a multiple of 8.5%/3%≈2.83
between RWA and the Basel III leverage ratio exposure measure. Therefore, for banks plotted above the
diagonal line, the Basel III Tier 1 leverage ratio requires more Tier 1 capital than the Tier 1 risk-based capital
ratio (ie the Basel III Tier 1 leverage ratio becomes the constraining requirement). 44 For banks plotted
below the diagonal line, the target Tier 1 risk-based capital ratio requires more capital than the leverage
ratio (ie the Tier 1 capital ratio remains the constraining requirement).
As shown in Graph 76, all banks meet the minimum Basel III Tier 1 leverage ratio of 3% as well as
the Tier 1 target risk-based capital ratio under the fully phased-in initial Basel III standards of 8.5%. The
graph also shows that the Basel III Tier 1 leverage ratio under initial Basel III standards is constraining for
77 banks out of 169, of which 43 Group 1 and 34 Group 2 banks (plotted above the diagonal line).

43
Calculated as the sum of a 6.0% Tier 1 minimum capital ratio plus 2.5% capital conservation buffer.
44
Note that the effect of the G-SIB surcharge is not considered here. As the G-SIB surcharges only apply to the risk-based
requirement under the initial Basel III framework, the relevant proportion between RWA and total leverage ratio exposure that
determines whether the Basel III leverage ratio is constraining or not and hence the slope of the diagonal line would be different
by bank.

88 Basel III Monitoring Report February 2023

Fully phased-in initial Basel III Tier 1 risk-based capital and leverage ratios
In per cent Graph 76

Tier 1 risk-based capital ratio (%)

40

30

20

10

0
10 20 30
Tier 1 leverage ratio (%)

Group 1 banks Group 2 banks

The dashed horizontal line represents a Tier 1 target risk-based capital ratio of 8.5%, whereas the dashed vertical line represents a Basel III
Tier 1 leverage ratio of 3%. The diagonal line represents points where an 8.5% fully phased-in Basel III Tier 1 target risk-based capital ratio
results in the same amount of required fully phased-in Basel III Tier 1 capital as a fully phased-in Basel III Tier 1 leverage ratio of 3%.

Source: Basel Committee on Banking Supervision.

5.2 Interactions between risk-based, output floor and leverage ratio capital
requirements under the final Basel III standards

This section discusses the interaction between Tier 1 risk-based, output floor and Basel III leverage ratio
capital requirements, all including the capital conservation and G-SIB buffers as applicable. The purpose
of this analysis is to gain deeper insight into which capital requirement component of the framework is
constraining for the banks in the sample. The constraining requirement in this analysis refers to the
requirement that imposes the largest amount of Tier 1 MRC among the three requirements mentioned
above. Accordingly, the Tier 1 MRC for a bank is determined as the highest of the requirement under the
risk-based framework, the requirement using the output floors and the requirement measured using the
Basel III leverage ratio.
Note that in contrast to the analyses presented in Section 2.1 and Section 2.2, the risk-based
capital requirements here denote the risk-based capital framework prior to the application of any output
floor. Also note that while all banks are by definition constrained by one of the measures, this does not
necessarily result in a capital shortfall for any of them. Finally, some capital requirements, such as D-SIB
buffer and Pillar 2 requirements, are not considered in the analysis. This tends to give more importance to
leverage ratio requirements relative to risk-based requirements. In the actual situation where those
additional requirements would be considered fewer banks could be constrained by the leverage ratio all
other things equal.
Graph 77 shows which of the three parts is constraining under both the current standard and the
final Basel III framework. For Group 2 banks, results are presented separately for IRB banks and banks only
using the standardised approach for credit risk (“pure SA”). 45.
Under the current initial Basel III framework, the transitional Basel I based floor is constraining for
nine out of the 88 Group 1 banks. For the remaining Group 1 banks, the risk-based ratio is constraining

45
Graph 77 does not distinguish between IRB and “pure SA” Group 1 banks as out of the 91 Group 1 banks in the sample only
16 are “pure SA” banks.

Basel III Monitoring Report February 2023 89

for a larger number of banks than the leverage ratio (46 and 33 banks respectively). Globally, under the
fully phased-in final Basel III framework, the output floor becomes more constraining for Group 1 banks,
especially at the expense of the risk-based ratio as the constraining requirement: The number of banks for
which the output floor is constraining increases from nine to 18. In parallel, the number of Group 1 banks
for which the risk-based ratio is the constraining requirement drops from 46 to 36.
Contrary, the number of G-SIBs constrained by the minimum leverage ratio remains high under
the current initial Basel III framework with 13 banks, followed by 10 banks constrained by the risk-based
ratio and seven banks constrained by the transitional Basel I-based floor. This ratio remains stable under
the fully phased-in final Basel III, with the leverage ratio still being the most dominant restriction.
For Group 2 banks, for analysis purposes, Graph 77 distinguishes between IRB and pure SA banks
(23 and 14 banks, respectively). Under the current initial Basel III framework, the leverage ratio is binding
for 17 out of 23 Group 2 IRB banks. Under the final Basel III framework, 13 Group 2 IRB banks are
constrained by the leverage ratio, whereas the output floor is constraining for three banks. For pure SA
Group 2 banks the ratio of banks constrained by risk-based capital requirements and leverage ratio
requirements stays roughly the same under the changing frameworks.

Percentage of banks constrained by different parts of the framework Graph 77

Group 1 banks Of which: G-SIBs Group 2 banks IRB Group 2 banks pure SA
Per cent Per cent Per cent Per cent

100 100 100 100

80 80 80 80

60 60 60 60

40 40 40 40

20 20 20 20

0 0 0 0
Current Final Current Final Current Final Current Final

Risk-based capital Output floor Leverage ratio

before output floor

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 78 shows the percentage of Group 1 banks constrained by different parts of the
framework, by region. In Europe, under the current initial Basel III framework, no bank is constrained by
the transitional Basel I based floor and the main binding ratio is the leverage ratio, of which 19 out of 29
European banks are constrained. This could be partially driven by the non-consideration of some risk-
based capital requirements, such as D-SIB buffer and Pillar 2 requirements in the analysis. Against this
background, the numbers in this section might overestimate the impact of the leverage ratio constraint.
Under the fully phased-in final Basel III framework, the output floor significantly gains relevance
constraining seven European banks Consequently, the number of banks constrained by either the leverage
ratio or risk-based capital requirements decreases (from 19 to 17 and from 10 to five, respectively)
In contrast, the development in the Americas is very different. Under the current initial Basel III
framework, the Basel I-based floor and the leverage ratio are equally relevant as the binding constraint
(both constraining six banks each out of 21), while nine banks are constrained by the risk-based capital
requirements before floor-application. Under the fully phased-in final Basel III framework, the number of
banks constrained by the leverage ratio remains stable, whereas the output floor loses significance (only
three banks constrained). Consequently, under the fully phased-in final Basel III framework, the majority

90 Basel III Monitoring Report February 2023

of banks in the Americas (12 banks) is constrained by the risk-based capital requirements before
application of the output floor.
For the rest of the world, for both initial and final Basel III framework, most banks are constrained
by the risk-based capital requirements before floor-application (27 and 19 banks out of 38 banks,
respectively). Nevertheless, the number of banks constrained by the output floor increases from three to
eight and the number of banks constrained by the leverage ratio increases from eight to 11.

Percentage of banks constrained by different parts of the framework, by region

Group 1 banks Graph 78

Europe Americas Rest of the world

Per cent Per cent Per cent

100 100 100

80 80 80

60 60 60

40 40 40

20 20 20

0 0 0
Current Final Current Final Current Final
Risk-based capital Output floor Leverage ratio
before output floor

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

6. Liquidity46

6.1 Liquidity Coverage Ratio

One of the two liquidity standards introduced by the Committee is the 30-day Liquidity Coverage Ratio
(LCR), which promotes short-term resilience against potential liquidity disruptions. The LCR requires global
banks to have sufficient high-quality liquid assets to withstand a stressed 30-day funding scenario
specified by supervisors. The LCR numerator consists of a stock of unencumbered, high-quality liquid
assets (HQLA) that must be available to cover any net outflow, while the denominator comprises cash
outflows minus cash inflows (subject to a cap at 75% of outflows) that are expected to occur in a severe
stress scenario. The LCR was revised by the Committee in January 2013 and came into effect on
1 January 2015. The requirement increased to 100% as of January 2019, which marks the end of the phase-
in of the LCR.
Data provided by 181 banks (115 Group 1 banks and 66 Group 2 banks) was of sufficient quality
and coverage to be incorporated in the LCR analysis in this report. As of the reporting date, banks within
the LCR sample had total assets of approximately €82.4 trillion. Based on an unbalanced data set of banks,
the weighted average LCR for the Group 1 banks reporting data for the June 2022 reporting date
decreased by 2.5 percentage points from end-December 2021 to 138.4%. The weighted average LCR for

46
The dashboards on the Committee’s website provide more detailed insights into the components of the LCR and the NSFR.

Basel III Monitoring Report February 2023 91

Group 2 banks decreased by 1.8 percentage points from 221.9% at end-December 2021 to 220.1% at the
end of June 2022.
While the weighted average LCR decreased for Group 1 banks, at end-June 2022, three Group 1
banks in the Americas and the rest of the world reported an LCR below 100%. This is a decrease from six
banks at end-December 2021. Among those banks that eliminated their shortfalls between end-December
2021 and end-June 2022, HQLA decrease by less than net liquidity outflows for two banks while the
increase in HQLA exceeded the increase in net outflows for one bank. All Group 2 banks report an LCR
well above 100%.

Liquidity Coverage Ratio1 Graph 79

By bank group Group 1 banks, by region

Per cent Per cent
^ ^ ^ ^

300 300

200 200

100 100

0 0
Group 1 banks Of which: G-SIBs Group 2 banks Europe Americas Rest of the world
1
See Section 1.3.3 for details on box plots. The sample is capped at 400%, meaning that all banks with an LCR above 400% were set to 400%.
The horizontal line represents a 100% LCR (applicable as from 1 January 2019).

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

As highlighted above, in the current reporting period there are several Group 1 banks with an
LCR below 100% and hence a shortfall (ie the difference between HQLA and net cash outflows) which
amounts to €14.8 billion.

6.2 Net Stable Funding Ratio

The second liquidity standard introduced by the Basel III reforms is the Net Stable Funding Ratio (NSFR),
a longer-term structural ratio designed to reduce funding risk by requiring banks to fund their activities
with sufficiently stable sources of funding to mitigate the risk of future funding stress.
For the NSFR, data provided by 155 banks (104 Group 1 and 51 Group 2 banks) was of sufficient
quality and coverage to be incorporated in the analysis in this report. As of the reporting date, these banks
had total assets of approximately €84.5 trillion.
The weighted average NSFR was 123.5% for Group 1 banks and 132.5% for Group 2 banks at
end-June 2022 compared with 125.2% and 134.2%, respectively, at end-December 2021. Overall, all
Group 1 and Group 2 banks reported an NSFR that met or exceeded 100% which was the situation
observed at end December 2021.

92 Basel III Monitoring Report February 2023

Net Stable Funding Ratio1 Graph 80

By bank group Group 1 banks, by region

Per cent Per cent
^
180 180

160 160

140 140

120 120

100 100

80 80
Group 1 banks Of which: G-SIBs Group 2 banks Europe Americas Rest of the world
1
See Section 1.3.3 for details on box plots. The red line is set at 100% (minimum NSFR level).

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Since all Group 1 and Group 2 banks exceeded 100%, there are no shortfalls. 47 For the evolution
of the shortfall for a consistent sample of banks, please refer to Section 6.3.

6.3 Liquidity Coverage Ratio and Net Stable Funding Ratio shortfalls over time

Graph 81 below displays the weighted average LCR, weighted average NSFR and shortfalls associated with
each standard for a balanced data set of banks across reporting periods since end-December 2012. 48 Given
the different samples of banks, results for the end-December and end-June 2022 periods in this section
may differ from the ones in Sections 6.1 and 6.2.
Group 1 banks that have reported LCR data for each of the reporting periods since end-December
2012 showed a decline in weighted average LCR for the second consecutive reporting period. The
weighted average LCR for these banks was 138.7% at end-June 2022, compared with 143.0% at end-
December 2021. The LCR was slowly increasing from end-December 2012 before decreasing end-
December 2019, followed by a distinct uptick during the pandemic. The aggregate LCR shortfall increased
slightly from €6.0 billion at end-December 2021 to €6.6 billion at end-June 2022.
Group 2 banks followed a similar pattern, with the weighted average LCR declining to 208.3% at
end-June 2022, compared with 223.4% at end-December 2021. The reported LCR data for each of the
reporting periods since end-December 2012 increased gradually through end-December 2018, before a
slight decrease in 2019 and subsequently spiking during the pandemic. However, the weighted average
LCR of Group 2 banks increased much more than Group 1 banks, growing from 163.0% at end-December
2019 to a high of 231.9% at the end-June 2021 reporting date.

47
The shortfall in stable funding measures the difference between balance sheet positions after the application of available stable
funding factors and the application of required stable funding factors for banks where the former is less than the latter.
48
Only those banks are included in this analysis that are reporting LCR and NSFR data for each reporting period since end-
December 2012. LCR and NSFR samples are different.

Basel III Monitoring Report February 2023 93

 The graph also displays NSFRs since end-December 2012. 49 The weighted average NSFR for
Group 1 banks was 122.8% at end-June 2022 and 124.3% at end-December 2021. The weighted average
NSFR for Group 2 banks was 128.2% at end-June 2022 and 129.7% at end-December 2021.
The aggregate shortfall for Group 1 banks that do not meet the 100% requirement generally
declined for each of the respective standards from end-June 2012 through end-December 2017. Since
then, the aggregate shortfall has consistently been relatively small. For the third period in a row, there was
no aggregate shortfall with regard to the 100% NSFR minimum requirement for both Group 1 banks and
Group 2 banks at end-June 2022.
In spite of the recent decreases in LCR and NSFR for all groupings, both liquidity ratios remain
significantly above pre-pandemic levels.

LCR, NSFR and related shortfalls at a 100% minimum requirement1

Balanced data set, exchange rates as at the reporting dates Graph 81

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent EUR bn Per cent EUR bn Per cent EUR bn

225 1,200 225 1,200 225 30

200 1,000 200 1,000 200 25

175 800 175 800 175 20

150 600 150 600 150 15

125 400 125 400 125 10

100 200 100 200 100 5

75 0 75 0 75 0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Ratio (lhs): LCR NSFR Shortfall (rhs): LCR NSFR
1
As described in the text, the NSFR time series depicts data reflecting NSFR standards released in December 2010, January 2014 and October
2014. Since the Committee did not collect NSFR data through its Basel III monitoring exercise for the end-June 2020 reporting date, the
relevant data points show the same values as for end-December 2019.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 82 displays the regional breakdown of the weighted average LCR and the weighted
average NSFR for a balanced data set of Group 1 banks across reporting periods since end-December
2012. The weighted average LCR at end-June 2022 for Europe and the rest of the world was respectively
152.4% and 144.9%, while the average LCR of the Americas is around 120%. While Europe and the Americas
had initially lower average LCRs compared with the rest of the world, the average LCRs of Europe and the
rest of the world tended to converge gradually before the onset of the pandemic. The regions with lower
end-2012 average ratios saw important increases in particular between end-December 2012 and end-
December 2014, and again since the start of the pandemic. The increase in Europe is now reversing,
although the LCR of European banks is still above end-2019 levels.
The weighted average NSFR at end-June 2022 for Group 1 banks in each of the three regions was
well in excess of 100%. While the NSFR has been roughly stable across all regions since end-December

49
Graph 81 depicts the NSFR as calculated under different versions of the NSFR framework (released in December 2010, January
2014 and October 2014, respectively). Calculations performed according to the final standard approved by the Committee in
October 2014 start with the end-December 2014 reporting period. See Basel Committee on Banking Supervision, Basel III: the
net stable funding ratio, October 2014, www.bis.org/bcbs/publ/d295.htm. Since the Committee did not collect NSFR data
through its Basel III monitoring exercise for the end-June 2020 reporting date, the relevant data points show the same values
as for end-December 2019.

94 Basel III Monitoring Report February 2023

2016, the average NSFRs of banks in Europe and the Americas have significantly increased over the past
two years, from 111.5% and 111.2% since end-December 2019 to respectively 120.2% and 123.2% at end-
June 2022 (despite the decrease observed between June 2021 and June 2022). This increase brought both
regions to a level in line with the rest of the world, which reported an average NSFR of 123.8% at end-
June 2022. The average NSFR of banks in Americas has decreased from a peak of 135.2% at end-June 2021
to 123.2% at end-June 2022.

LCR and NSFR by region

Group 1 banks, balanced data set Graph 82

LCR NSFR1
Per cent Per cent

180 180

160 160

140 140

120 120

100 100

80 80
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Europe Americas Rest of the world

1
See footnote 1 to Graph 88.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. The LCR dashboard on the
Committee’s website provides the same regional breakdown for G-SIBs.

Graph 83 displays the share of banks, in a balanced data set, that meet the 100% LCR and NSFR
requirements. The share of Group 1 banks meeting both requirements has increased from 52.2% at end-
December 2012 to 100.0% at end-June 2022, while the share of Group 2 banks meeting both requirements
increased from 50.0% to 100.0% during the same period.

Basel III Monitoring Report February 2023 95

Share of banks meeting the LCR and NSFR requirements1
Balanced data Graph 83

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent

100 100 100

80 80 80

60 60 60

40 40 40
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
LCR NSFR Both
1
Samples for LCR and NSFR may differ.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 84 displays the weighted average LCR for a balanced data set of banks across reporting
periods since end-December 2012, along with a breakdown of the period-to-period changes of the LCR
into changes in HQLA and changes in net outflows. This decomposition shows that the recent decrease in
the weighted average LCR for Group 1 banks is driven by increases in net outflows which was only partially
offset by increases in HQLA. The decrease since June 2021 in weighted average LCR for Group 2 banks has
been driven by a stagnation followed by a decrease in HQLA and an increase in net outflows. This follows
three reporting periods where HQLA increased significantly driven by central bank reserves.

LCR and change in HQLA and net outflows

Balanced data set, exchange rates as of the current reporting date Graph 84

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent Per cent Per cent Per cent

225 50 225 50 225 50

200 40 200 40 200 40

175 30 175 30 175 30

150 20 150 20 150 20

125 10 125 10 125 10

100 0 100 0 100 0

75 −10 75 −10 75 −10

50 −20 50 −20 50 −20

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

LCR (lhs) Change in HQLA (rhs) Change in net outflows (rhs)

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Graph 85 provides a breakdown by region of the results in Graph 84 for Group 1 banks. It displays
the weighted average LCR and a decomposition of period-to-period LCR changes into changes in HQLA

96 Basel III Monitoring Report February 2023

and net outflows. As can be seen in the graph, LCR of banks in Europe have decreased as net outflows
significantly increased while the amount of HQLA remained overall stable. The LCR of banks in the
Americas picked up at end-June 2020 as a result of the increase in HQLA that exceeded the increase in net
outflows before declining and stabilising around 120% since June 2021. For the rest of the world, both net
outflows and HQLA increased until end-December 2021 and since then the LCR decreased to 145%.

LCR and change in HQLA and net outflows, by region

Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 85

Europe Americas Rest of the world

Per cent Per cent Per cent Per cent Per cent Per cent

180 40 180 40 180 40

160 30 160 30 160 30

140 20 140 20 140 20

120 10 120 10 120 10

100 0 100 0 100 0

80 −10 80 −10 80 −10

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
LCR (lhs) Change in HQLA (rhs) Change in net outflows (rhs)

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. The LCR dashboard on the
Committee’s website provides the same regional breakdown for G-SIBs.

Graph 86 shows the evolution of the LCR and its drivers. Starting with the June 2012 LCR, the
cumulative effect on the LCR of an increase in HQLA is added to the LCR, while the impact of cumulative
increases in net outflows is subtracted from the baseline LCR. HQLA have grown faster over the years
compared with the net outflows, which has resulted in an overall improvement in the LCR over time.

Evolution of the LCR and its drivers

Group 1 banks, balanced data set Graph 86

Per cent

150

100

50

−50
2014 2016 2018 2020 2022

LCR 2012 HQLA Net outflows Total

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

Basel III Monitoring Report February 2023 97

Evolution of the LCR and its drivers, by region
Group 1 banks, balanced data set Graph 87

Europe Americas Rest of the world

Per cent Per cent Per cent

200 200 200

150 150 150

100 100 100

50 50 50

0 0 0

−50 −50 −50

−100 −100 −100

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
LCR 2012 HQLA Net outflows Total

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. The LCR dashboard on the
Committee’s website provides the same regional breakdown for G-SIBs.

Graph 88 depicts the change in Available Stable Funding (ASF) and Required Stable Funding (RSF)
over time. For all bank groups, there were significant positive changes in ASF of more than 6.8 percentage
points for the end-December 2013 reporting date, also reflecting the changes to the definition of the NSFR
standard. Since 2015, the change in ASF and RSF have generally stabilised for Group 1 banks within 5%
over a six-month period but experienced a turbulence during the pandemic. For this period, the effect of
the pandemic seemed to have settled down as end-December 2021 reporting period which showed a
1.2% increase in ASF and a 1.0% increase in RSF before increasing by end-June 2022 when banks
experienced an increase in ASF and RSF respectively of 3.5% and 4.8%. The average NSFR is on a
decreasing trend since end December 2021 for Group 1 and Group 2 banks, respectively from 124.3% to
122.8% and from 129.7% to 128.2%. Figures of Group 2 banks were slightly more volatile for both ASF and
RSF but also stabilised since 2015 until the pandemic. For Group 2 banks, the end-June 2022 reporting
period shows less important variation than for Group 1 variation with a 2.8% increase in ASF and a 4.0%
increase in RSF from previous period, compared with a 4.7% increase in ASF and an 1.8% increase in RSF
in end-December 2021 period.
Graph 89 illustrates a regional breakdown of the evolution of the weighted average NSFR and
changes in ASF and RSF for Group 1 banks over time. For all regions, figures in 2013 reflect changes to the
definition of the NSFR standard.

98 Basel III Monitoring Report February 2023

NSFR and change in ASF and RSF1
Balanced data set, exchange rates as of the current reporting date Graph 88

Group 1 banks Of which: G-SIBs Group 2 banks

Per cent Per cent Per cent Per cent Per cent Per cent
140 20 140 20 140 20
130 15 130 15 130 15
120 10 120 10 120 10
110 5 110 5 110 5
100 0 100 0 100 0
90 −5 90 −5 90 −5
80 −10 80 −10 80 −10
70 −15 70 −15 70 −15
60 −20 60 −20 60 −20
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
NSFR (lhs) Change in ASF (rhs) Change in RSF (rhs)
1
See footnote 1 to Graph 81.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

NSFR and change in ASF and RSF,1 by region

Group 1 banks, balanced data set, exchange rates as of the current reporting date Graph 89

Europe Americas Rest of the world

Per cent Per cent Per cent Per cent Per cent Per cent

150 25 150 25 150 25

140 20 140 20 140 20

130 15 130 15 130 15

120 10 120 10 120 10

110 5 110 5 110 5

100 0 100 0 100 0

90 −5 90 −5 90 −5

80 −10 80 −10 80 −10

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

NSFR (lhs) Change in ASF (rhs) Change in RSF (rhs)

1
See footnote 1 to Graph 81.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. The NSFR dashboard on the
Committee’s website provides the same regional breakdown for G-SIBs.

Basel III Monitoring Report February 2023 99

 Graph 90 shows the evolution of the NSFR and its drivers. 50 Starting with the June 2012 NSFR,
the cumulative effect on the NSFR of an increase in ASF is added to the NSFR, while the impact of
cumulative increases in RSF is subtracted from the baseline NSFR. ASF has grown faster over the years
compared with RSF, which has resulted in an overall improvement in the NSFR over time. Graph 91 shows
the same evolution for the three regions.

Evolution of NSFR and its drivers1

Group 1 banks, balanced data set Graph 90

Per cent

100

50

−50
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

NSFR 2012 ASF RSF Total

1
See footnote 1 to Graph 81.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size.

50
Please note that while Graph 88 shows significant increases in both ASF and RSF, this is not the case for Graph 90. Graph 90
uses a different methodology in which the growth rate of both ASF and RSF is deflated by the growth in total assets/liabilities
to avoid continuously growing stacks of ASF and RSF, which cancel each other out. Consequently, it will show an increase in
ASF/RSF if this increase is more than proportionate to the growth of assets and cause a discrepancy in the evolution of ASF/RSF
as shown in Graph 88. To give an example, at end-December 2020 there was an RSF increase of 6.0%. However, this increase
was less than proportionate to the growth of assets, resulting in a decrease of the yellow RSF stack in Graph 90 compared with
the previous period. The same remark goes for the discrepancy between Graph 89 and Graph 91.

100 Basel III Monitoring Report February 2023

Evolution of NSFR and its drivers,1 by region
Group 1 banks, balanced data set Graph 91

Europe Americas Rest of the world

Per cent Per cent Per cent

100 100 100

50 50 50

0 0 0

−50 −50 −50

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
NSFR 2012 ASF RSF Total
1
See footnote 1 to Graph 81.

Source: Basel Committee on Banking Supervision. See the Excel data file for underlying data and sample size. The NSFR dashboard on the
Committee’s website provides the same regional breakdown for G-SIBs.

7. Exposures to cryptoassets

7.1 Data and sample

The Basel III monitoring exercise based on end-2021 data introduced a new cryptoasset data collection
template. The template was specifically designed to support the Committee’s two consultative documents
on the prudential treatment of banks’ cryptoasset exposures, which were published on 10 June 2021 and
30 June 2022. 51 The Committee published the final prudential standard on 16 December 2022, which it
agreed to implement by 1 January 2025. 52 The template collects granular information on banks’
cryptoasset exposures and cryptoassets under custody, including information at the level of individual
cryptoassets and activities.
As of end-June 2022, 17 Group 1 banks reported cryptoasset exposures or cryptoassets under
custody – 11 from the Americas, 4 from Europe, and 2 from the rest of the world (Graph 92, left-hand
panel). Compared with end-2021, three European Group 2 banks are no longer included in the sample as
they did not submit cryptoasset data, 53 while one bank from the Americas was added to the sample. These
banks make up a significant share of the wider sample of 181 banks considered in the Basel III monitoring
exercise in terms of total RWA (21%) and overall leverage ratio exposure measure (LREM) (24%) (Graph 92,
right-hand panel). Furthermore, there may be banks included in the wider Basel III monitoring exercise
sample with cryptoasset exposures or cryptoassets under custody who nonetheless did not submit data
related to those exposures, leading to potential underestimation.

51
See www.bis.org/bcbs/publ/d533.htm.
52
See www.bis.org/bcbs/publ/d545.htm.
53
Two of the banks that dropped out of the sample had participated in the end-2021 crypto exercise but not the wider Basel III
monitoring exercise and appeared to specialise in cryptoasset activity.

Basel III Monitoring Report February 2023 101

A small portion of banks reported cryptoasset exposures or cryptoassets under
custody as of end-June 2022 Graph 92

Sample of reporting banks Proportion of crypto reporting banks to total sample1

Number of banks Per cent

2 20

4
15

10

11 5

Europe 0
Americas RWA LREM
Rest of the world
Europe Americas Rest of the world
1
As a percentage of the full Basel III monitoring sample of banks.

Source: Basel Committee on Banking Supervision

7.2 Overall amounts of prudential exposures and assets under custody

Total prudential cryptoasset exposures 54 and cryptoassets under custody reported by banks amount to
approximately €2.9 billion and €1.0 billion, respectively (Graph 93, left and middle panel). 55 In relative
terms, prudential exposures make up only 0.013% of total exposures on a weighted average basis across
the sample of banks reporting cryptoasset exposures, 56 while cryptoassets under custody make up only
0.005% of total exposures. When considering the whole sample of banks included in the Basel III
monitoring exercise, 57 the share shrinks to 0.003% and 0.001% of total exposures, respectively.
Compared with end-2021 data, the reported prudential exposures increased by €0.68 billion
(+30%), while cryptoassets under custody declined by €2.0 billion (-66%). Approximately 40% of the drop
in reported cryptoassets under custody is due to the reduction in the sample of banks participating in the
exercise, as mentioned above, while the remainder is due to the general decline in the market value of
cryptoassets since end-2021 and/or banks’ reduced positions compared with the previous period. The
increase in prudential exposures is due to increased underlying cryptoasset activity, partially offset by the
reduction in the sample mentioned above.

54
Prudential cryptoasset exposures are defined here as direct cryptoasset exposures, including synthetic or derivative exposures,
that give rise to credit or market RWA.
55
Some of the figures may not be fully comparable with those included in the Basel III monitoring report based on end-2021
data. This is due to resubmissions of end-2021 data and significant improvements in data quality which allow to better
distinguish between prudential exposures, assets under custody, and other exposures/amounts (eg, related to certain
facilitation of client activities that do not result in prudential exposures or assets under custody). Accordingly, the results in this
report present prudential exposures and cryptoassets under custody separately, and do not include other exposures/amounts
which do not give rise to credit or market RWA. In contrast, due to data limitations, prudential exposures, assets under custody,
and other exposures/amounts were reported together in the Basel III monitoring report based on end-2021 data, leading to
larger overall reported cryptoasset amounts.
56
Cryptoasset exposures are weighted by the leverage ratio exposure measure.
57
That is, additionally including those banks that did not report cryptoasset exposures or cryptoassets under custody, but which
participated in the wider Basel III monitoring exercise.

102 Basel III Monitoring Report February 2023

 Cryptoasset exposures are distributed unevenly across reporting banks. One bank makes up more
than half of overall cryptoasset prudential exposures (62%), while four more banks make up just below
35% of the remaining exposures (Graph 93, right-hand panel).

Crypto exposures and activities remain small and unevenly distributed

Unbalanced sample Graph 93

Prudential exposures Assets under custody Distribution of prudential exposures

across banks
Per cent EUR bn Per cent EUR bn Per cent

4.4
4.8
0.015 3 0.015 3

10.1

0.01 2 0.01 2

61.7
15.4
0.005 1 0.005 1

0 0 0 0
% of Basell III % of crypto Prudential % of Basel III % of crypto Assets
monitoring sample with exposures monitoring sample with under
sample positive (rhs) sample positive custody
(lhs) exposure (lhs) exposure (rhs)
(lhs) (lhs)

H2 2021 H1 2022

Source: Basel Committee on Banking Supervision.

7.3 Composition of prudential exposures

The underlying assets of the reported prudential cryptoasset exposures are primarily Bitcoin (43%),
Coinbase 58 (29%), Ether (4%), Singtel Group (3%), and Sembcorp Financial Services 59 (1%) (Graph 94, left-
hand panel). Almost all (99%) of exposures with underlying exposures to Bitcoin or Ether are due to
products linked to these two cryptoassets, rather than spot exposures (Graph 94, middle panel).
Banks reported many different activities giving rise to prudential cryptoasset exposures. For the
purpose of this report, they have been grouped as follows:
1. Clearing: clearing of cryptoasset derivatives
2. Trading: trading of cryptoassets or cryptoasset-linked products
3. Holdings: owning cryptoassets or cryptoasset-linked products
4. Lending and SFTs: lending to entities with cryptoasset exposures or against cryptoasset
collateral; and securities financing transactions (SFTs) involving cryptoassets
5. Facilitation: facilitation of client trading (self- or manager-directed) or other activity of
cryptoasset-linked products; and management of investment portfolios
6. Other: provision of insurance for cryptoassets; internal or intra-bank operational use of
cryptoassets; and all other activity.

58
The reported exposures to Coinbase include equities and debt issued by this firm.
59
The reported exposures to Singtel Group and Sembcorp Financial Service relate to tokenised bonds issued by these firms.

Basel III Monitoring Report February 2023 103

 Nearly three-quarters of reported prudential cryptoasset exposures are generated by banks’
clearing (41%) and trading activity (32%) (Graph 94, right-hand panel). The remainder is roughly divided
evenly amongst banks’ holdings (10%), lending and SFTs (8%), and other activities (8%).

Prudential exposures by various criteria Graph 94

Underlying 1 Instrument type1 Activity 2

Per cent Per cent Per cent

40 40 40

30 30 30

20 20 20

10 10 10

0 Financial Services 0 0
Financial Services

Clearing

Trading
Ether
Singtel

product

product
Ether

Bitcoin-linked

Coinbase
Eiher-linked

Singtel group
Sembcorp

Bitcoin
Bitcoin

Coinbase

Group

Sembcorp

Holdings

and SFTs
Other

Facilitation
Lending
1
The reported exposures to Coinbase include equities and debt issued by this firm, while the reported exposures to Singtel Group and
Sembcorp Financial Service relate to tokenised bonds issued by these firms. 2 Clearing: clearing of cryptoasset derivatives; Trading: trading
of cryptoassets or cryptoasset-linked products; Holdings: owning cryptoassets or cryptoasset-linked products; Lending and SFTs: lending to
entities with cryptoasset exposures or against cryptoasset collateral, and SFTs involving cryptoassets; Facilitation: facilitation of client trading
(self- or manager-directed) or other activity of cryptoasset-linked products, and management of investment portfolios; Other: provision of
insurance for cryptoassets, internal or intra-bank operational use of cryptoassets, and all other activity.

Source: Basel Committee on Banking Supervision.

104 Basel III Monitoring Report February 2023

 Martin Birn Lea Charlotte Neugebauer Verena Seidl
Secretariat of the Basel Committee Deutsche Bundesbank Secretariat of the Basel Committee
on Banking Supervision on Banking Supervision

Regional distributions of Group 1 and Group 2 banks and their

impact on results in the Basel III monitoring reports

Compared with the previous period, the total sample size for the cumulative impact assessment fell from
169 to 135 banks for the end-June 2022 reporting date. The number of Group 1 banks declined by 10%
(Graph 1), while RWA increased slightly (Graph 2). In contrast, the number of Group 2 banks decreased by
nearly 40%, while RWA decreased by 44%. The RWA increase for Group 1 banks is driven mainly by
portfolio changes, whereas the RWA decrease for Group 2 banks is driven mainly by sample changes. The
different development between both groups stems from an underlying issue: while the sample of Group 1
banks is somewhat balanced between banks from Europe, the Americas and the rest of the world, the
sample of Group 2 banks is strongly dominated by European banks.
As of end-December 2021, the European Banking Authority (EBA) decided to make the Basel III
monitoring exercise mandatory for the year-end reporting dates in order to ensure a more stable and
representative sample in Europe. While this resulted in a somewhat larger sample for the end-2021
exercise, several European banks decided not to participate in the end-June 2022 exercise. Therefore, the
sample size in the Committee’s Basel III monitoring reports will show a high volatility between end-June
and end-December reporting dates. Since European banks are especially prominent in the Group 2 sample,
this development is particularly visible in this group.
Considering that the Basel III monitoring analyses build the base for policy decisions, both banks
and supervisors benefit from representative samples for all reporting dates. Hence, providing data for all
reporting dates is highly appreciated.
Comparing the sample composition across regions strengthens the thesis that Group 2 banks’
participation is above average in the European Union. About half of the European banks belong to Group 2
(Graph 1, left-hand panel). Nevertheless, Group 2 banks do not materially contribute to total RWA in any
region (Graph 2, left-hand panels with different scales). In Europe, the share of Group 2 banks in total RWA
at the end-June 2022 reporting date is less than 10%, and in the other two regions it is even less than 1%.
This difference between regions is driven by different degrees of concentration of the banking
systems across Basel Committee member countries and by the different application of the Basel
framework. While the Basel framework is designed for internationally active banks, some jurisdictions such
as the European Union decided to also apply the framework to smaller domestic banks to maintain a
domestic level playing field. Hence, the participation of Group 2 banks in this study is of particular interest
to these policymakers.

Basel III Monitoring Report February 2023 105

Changes in number of banks between end-December 2021 and end-June 2022 Graph 1

Number of banks Relative changes

Number of banks Per cent

100
0
80

46 60 −20
4
45
6
22 40
3 −40
22
7
20

40 30 51 28 0 −60
H2 2021 H1 2022 H2 2021 H1 2022 Group 1 banks Group 2 banks
Group 1 banks Group 2 banks
Europe Americas Rest of the world Total

Source: Basel Committee on Banking Supervision.

Changes in RWA between end-December 2021 and end-June 2022 Graph 2

RWA Relative changes

EUR bn EUR bn Per cent

61
1,250
47 20
30k
1,000
0
20k 750
17,715 18,544 38
63 −20
500
8,793 10k
9,852 −40
250

8,575 8,053 0 1,256 659 0 −60

H2 2021 H1 2022 H2 2021 H1 2022 Group 1 banks Group 2 banks
Group 1 banks Group 2 banks

Europe Americas Rest of the world Total

Source: Basel Committee on Banking Supervision.

Table 1 shows the composition of the Group 1 bank sample. The sample is quite balanced: For
the end-December 2021 reporting date, about 40% of banks belong to Europe and the rest of the world,
each, while banks from the Americas contribute 20% of banks to the sample. For the end-June 2022
reporting date, fewer European banks are represented in the sample. Therefore, the European share
decreased to 31%, resulting in increasing shares for the Americas (23%) and the rest of the world (46%).
Overall, the shift between both reporting dates is not material. Furthermore, the change in sample
composition did not affect Group 1 banks’ RWA distribution significantly. For both reporting dates, about
one quarter is contributed by European and American banks, each. Therefore, more than 50% of RWA
stem from banks in the rest of the world.

106 Basel III Monitoring Report February 2023

 Composition of the Group 1 banks sample Table 1

H2 2021 H1 2022
Number of banks Total RWA Number of banks Total RWA
Europe 40 37% 8,575 24% 30 31% 8,053 22%
Americas 22 20% 8,793 25% 22 23% 9,852 27%
Rest of the world 46 43% 17,715 50% 45 46% 18,544 51%
All 108 100% 35,083 100% 97 100% 36,449 100%
Source: Basel Committee on Banking Supervision.

In contrast, Group 2 banks are strongly dominated by European banks (Table 2). For the end-
December 2021 reporting date, 84% of participating banks belong to the European region. Even though
the number of European Group 2 banks reduced significantly for the end-June 2022 reporting date, the
vast majority of Group 2 banks still originates from Europe (74%). Analysing the composition of Group 2
banks’ RWA strengthens this observation. European banks contribute 92% of RWA in H2 2021 and still
87% in H1 2022.

Composition of the Group 2 banks sample Table 2

H2 2021 H1 2022
Number of banks Total RWA Number of banks Total RWA
Europe 51 84% 1,256 92% 28 74% 659 87%
Americas 6 10% 47 3% 7 18% 63 8%
Rest of the world 4 7% 61 4% 3 8% 38 5%
All 61 100% 1,364 100% 38 100% 760 100%
Source: Basel Committee on Banking Supervision.

The imbalance of regions within Group 2 banks also results in a bias towards European banks in
the overall aggregate key figures for this group (Table 3). Calculating the average MRC impact across
regions shows that average numbers in the Americas and in the rest of the world deviate significantly from
the numbers populated at the global level (Table 4 in the body of this report), because European banks
offset the effects observed in these regions nearly completely. For Group 1 banks, the total averages are
less biased towards the results of European banks, thus presenting more balanced results at the global
level.
A more detailed observation of Group 1 and Group 2 banks’ change in MRC among countries
that provide data for both groups supports this thesis. Overall, 10 countries provide reliable data for both
groups. For most of them, Group 2 banks show a lower average MRC change. There is only one country
where average MRC change for Group 2 banks exceeds the one for Group 1 banks.

Basel III Monitoring Report February 2023 107

 Weighted average changes in Tier 1 MRC at the target level due to the final
Basel III standards across regions
In per cent Table 3

H2 2021 H1 2022
Group 1 Group 2 Group 1 Group 2
Europe 17.5 6.1 15.9 -1.0
Americas 3.9 2.4 1.9 0.9
Rest of the world -6.8 0.0 -3.9 -9.8
Global 2.4 5.7 2.8 -2.0
Source: Basel Committee on Banking Supervision.

This explains another observation. For the end-December 2021 and earlier reporting dates, the
average MRC change at global level was usually higher for Group 2 banks than for Group 1 banks. This
could lead to the impression that Group 2 banks face a stronger impact of the final Basel III framework.
Considering the average MRC changes across regions as shown in Table 3 proves that this assumption is
not accurate. Global average MRC changes are higher only for Group 2 banks, because the sample is
biased towards European banks. Observing the individual regions, Group 2 banks average MRC changes
are lower than Group 1 banks average MRC changes in every region. Therefore, there is no evidence for a
genuinely higher impact of the revisions to the framework on smaller banks. Instead, differences in the
current national implementation of the Basel II and initial Basel III frameworks may explain some of the
differences in impact.

108 Basel III Monitoring Report February 2023

Annex A: Basel III standards and phase-in arrangements

Basel III minimum requirements and buffers Table A.1

As of 1 January 2019
Leverage ratio 3.0%
Minimum CET1 ratio 4.5%
Capital conservation buffer 2.50%
G-SIB surcharge 1.0%–2.5%
Minimum common equity plus capital conservation buffer 7.0%
Phase-in of deductions from CET1 (including amounts exceeding
100%
the limit for DTAs, MSRs and financials)
Minimum Tier 1 capital 6.0%
Minimum total capital 8.0%
Minimum total capital plus capital conservation buffer 10.5%
Capital instruments that no longer qualify as Tier 1 capital or Phased out over 10-year horizon beginning 2013
Tier 2 capital
Liquidity Coverage Ratio 100%
Net Stable Funding Ratio 100%1
1
Note that as of May 2020, a final rule for the Net Stable Funding Ratio is in force in 12 out of 27 Basel Committee member jurisdictions.
See Basel Committee on Banking Supervision, Eighteenth progress report on adoption of the Basel regulatory framework, July 2020,
www.bis.org/bcbs/publ/d506.htm, p 8.

Final Basel III phase-in arrangements

Shading indicates transition periods – all dates are as of 1 January. Table A.2

2023 2024 2025 2026 2027 2028

Revisions to the standardised and internal ratings-
Introduce
based approaches to credit risk
Revised CVA and market risk frameworks Introduce
Revised operational risk framework Introduce
50% 55% 60% 65% 70%
Output floor Increase in RWA subject to 25% cap 72.5%
at national discretion.
Leverage ratio exposure measure and G-SIB surcharge Introduce

Basel III Monitoring Report February 2023 109

 Definition of different Basel III regimes Table A.3

Initial Basel III framework Transitional final Basel III Fully phased-in final Basel III
framework framework
Definition of Basel III: A global framework for more resilient banks and the banking system,
capital www.bis.org/publ/bcbs189.htm
Basel III: A global framework for
Basel III: Finalising post-crisis reforms,
more resilient banks and the banking
www.bis.org/bcbs/publ/d424.htm
system,
Capital requirements for bank exposures to central
Credit risk www.bis.org/publ/bcbs189.htm
counterparties, www.bis.org/publ/bcbs227.htm
Capital requirements for bank
Capital requirements for banks’ equity investments in funds,
exposures to central counterparties,
www.bis.org/publ/bcbs266.htm
www.bis.org/publ/bcbs227.htm
Basel II: International Convergence
Operational of Capital Measurement and Capital Basel III: Finalising post-crisis reforms,
risk Standards: A Revised Framework, www.bis.org/bcbs/publ/d424.htm
www.bis.org/publ/bcbs128.htm
Revisions to the Basel II market risk
framework,
www.bis.org/publ/bcbs158.htm Minimum capital requirements for market risk,
Market risk
Guidelines for computing capital for www.bis.org/bcbs/publ/d457.htm
incremental risk in the trading book,
www.bis.org/publ/bcbs159.htm
Basel III: A global framework for
Counterparty more resilient banks and the The standardised approach for measuring counterparty credit
credit risk banking system, risk exposures, www.bis.org/publ/bcbs279.htm
www.bis.org/publ/bcbs189.htm
Basel III: Finalising post-crisis reforms,
www.bis.org/bcbs/publ/d424.htm
Basel III: A global framework for
Targeted revisions to the revised CVA framework published in
more resilient banks and the
CVA July 2020 are not yet considered for the end-December 2019
banking system,
reporting date. They will be reflected in the exercise on the
www.bis.org/publ/bcbs189.htm
end-2020 reporting date.
www.bis.org/bcbs/publ/d507.htm
Basel III: A global framework for
more resilient banks and the Revisions to the securitisation framework,
Securitisation
banking system, www.bis.org/bcbs/publ/d374.htm
www.bis.org/publ/bcbs189.htm
Output floor of 50%, Output floor of 72.5%,
Basel II: International Convergence
Basel III: Finalising post-crisis Basel III: Finalising post-crisis
of Capital Measurement and Capital
Floor reforms, reforms,
Standards: A Revised Framework,
www.bis.org/publ/bcbs128.htm www.bis.org/bcbs/publ/ www.bis.org/bcbs/publ/
d424.htm d424.htm
Basel III: A global framework for
more resilient banks and the
Basel III: Finalising post-crisis reforms,
banking system,
Leverage www.bis.org/bcbs/publ/d424.htm;
www.bis.org/publ/bcbs189.htm;
ratio Leverage ratio treatment of client cleared derivatives
Basel III leverage ratio framework
www.bis.org/bcbs/publ/d467.htm
and disclosure requirements,
www.bis.org/publ/bcbs270.htm

110 Basel III Monitoring Report February 2023

Minimum and target risk-based capital and leverage ratio requirements
Fully phased-in final Basel III standards, in per cent Table A.4

Fully implemented risk-based requirement Fully implemented leverage ratio requirement

Minimum Target non- Target G-SIBs Minimum all banks Target G-SIBs
G-SIBs and target non-G-SIBs
CET1 capital 4.5 7.0 8.0–9.5
Tier 1 capital 6.0 8.5 9.5–11.0 3.0 3.5–4.25
Total capital 8.0 10.5 11.5–13.0

Basel III Monitoring Report February 2023 111

Annex B: Sample statistics

Number of banks for which data have been included1 Table B.1

Group 1 banks Group 2 banks

RWA and capital

RWA and capital

Securitisation

Securitisation
Leverage

Leverage
NSFR

NSFR
LCR

LCR
All

All
Argentina (AM) 0 0 0 0 0 0 3 3 3 3 3 3
Australia (RW) 4 4 0 4 3 0 1 1 0 1 1 0
Belgium (EU) 2 2 2 2 1 2 2 2 2 2 1 1
Brazil (AM) 2 2 2 2 2 2 0 0 0 0 0 0
Canada (AM) 6 6 6 6 6 6 0 0 0 0 0 0
China (RW) 6 6 6 6 6 0 0 0 0 0 0 0
France (EU) 5 5 5 5 3 4 2 2 2 2 0 0
Germany (EU) 11 11 11 11 11 3 25 25 24 25 23 0
India (RW) 9 9 9 9 9 3 0 0 0 0 0 0
Indonesia (RW) 0 0 0 0 0 0 2 2 2 2 2 2
Italy (EU) 2 2 2 2 2 2 8 8 8 8 1 5
Japan (RW) 15 12 15 15 12 11 1 1 1 1 1 1
Korea (RW) 8 8 8 8 8 5 0 0 0 0 0 0
Luxembourg (EU) 0 0 0 0 0 0 2 2 2 2 2 2
Mexico (AM) 2 2 2 2 2 2 4 4 4 4 4 1
Netherlands (EU) 4 4 4 4 2 3 4 4 4 4 3 1
Saudi Arabia (RW) 3 3 3 3 3 1 0 0 0 0 0 0
Singapore (RW) 3 3 3 3 3 2 0 0 0 0 0 0
South Africa (RW) 4 4 4 4 4 4 2 2 2 2 2 1
Spain (EU) 2 2 2 2 2 2 4 4 4 4 2 3
Sweden (EU) 3 3 3 3 3 2 3 3 3 3 3 0
Switzerland (EU) 2 2 2 2 2 2 0 0 0 0 0 0
Turkey (EU) 3 3 2 3 3 0 0 0 0 0 0 0
United Kingdom (EU) 5 5 5 5 5 5 3 3 3 3 3 3
United States (AM) 13 13 13 13 11 8 0 0 0 0 0 0
Total 114 111 109 114 103 69 66 66 64 66 51 23
Of which: G-SIBs 30 30 30 30 28 26 0 0 0 0 0 0
1
The regional grouping to which a country is assigned is included in parentheses. AM denotes Americas, EU Europe and RW the rest of
the world.

Source: Basel Committee on Banking Supervision.

Basel III Monitoring Report February 2023 113

 Additional sample statistics1
In billions of euros Table B.2

Number of Tier 1 capital Risk-weighted Accounting Leverage total

banks assets total assets exposure
Group 1 banks 96 5,301 36,367 84,094 88,329
Of which: Europe 30 1,298 8,053 26,026 26,079
Of which: Americas 22 1,367 9,852 21,841 24,673
Of which: Rest of the world 44 2,635 18,462 36,226 37,576
Of which: G-SIBs 30 3,787 25,810 61,185 63,598
Group 2 banks 38 134 760 2,459 2,443
1
Tier 1 capital, RWA and leverage ratio exposure assume full implementation of Basel III.

Source: Basel Committee on Banking Supervision.

114 Basel III Monitoring Report February 2023

 Number of banks for which data have been included in the assessment of the
impact of the final Basel III framework1 Table B.3

Group 1 banks Group 2 banks

Argentina (AM) 0 3
Belgium (EU) 2 1
Brazil (AM) 2 0
Canada (AM) 6 0
China (RW) 5 0
France (EU) 4 0
Germany (EU) 3 9
India (RW) 5 0
Indonesia (RW) 0 2
Italy (EU) 2 5
Japan (RW) 10 1
Korea (RW) 7 0
Luxembourg (EU) 0 2
Mexico (AM) 2 4
Netherlands (EU) 4 3
Saudi Arabia (RW) 2 0
Singapore (RW) 3 0
South Africa (RW) 4 1
Spain (EU) 2 3
Sweden (EU) 3 3
Switzerland (EU) 2 0
Turkey (EU) 2 0
United Kingdom (EU) 5 3
United States (AM) 11 0
Total 86 40
1
The regional grouping to which a country is assigned is included in brackets. AM denotes Americas, EU Europe and RW the rest of the
world.

Source: Basel Committee on Banking Supervision.

Basel III Monitoring Report February 2023 115

Previous monitoring reports published by the Basel Committee

December 2010 Results of the comprehensive quantitative impact study, December 2010,
www.bis.org/publ/bcbs186.htm
April 2012 Results of the Basel III monitoring exercise as of 30 June 2011,
www.bis.org/publ/bcbs217.htm
September 2012 Results of the Basel III monitoring exercise as of 31 December 2011,
www.bis.org/publ/bcbs231.htm
March 2013 Results of the Basel III monitoring exercise as of 30 June 2012,
www.bis.org/publ/bcbs243.htm
September 2013 Basel III monitoring report, www.bis.org/publ/bcbs262.htm
March 2014 Basel III monitoring report, www.bis.org/publ/bcbs278.htm
September 2014 Basel III monitoring report, www.bis.org/publ/bcbs289.htm
Main findings of the trading book hypothetical portfolio exercise Diana Iercosan, Derek Nesbitt
and Arnaud Sandrin
March 2015 Basel III monitoring report, www.bis.org/bcbs/publ/d312.htm
Analysis of the QIS for the fundamental review of the trading book
September 2015 Basel III monitoring report, www.bis.org/bcbs/publ/d334.htm
March 2016 Basel III monitoring report, www.bis.org/bcbs/publ/d354.htm
Comprehensive QIS on interest rate risk in the banking book Ethan Goh, Kamil Pliszka and
Davy Reinard
September 2016 Basel III monitoring report, www.bis.org/bcbs/publ/d378.htm
Results of the quantitative impact study on the large exposures review Marie-Céline Bard, Ken
clause Taniguchi and Lynnette
Withfield
February 2017 Basel III monitoring report, www.bis.org/bcbs/publ/d397.htm
Impact of the revised minimum capital requirements for market risk Scott Nagel
Results of the survey on the interaction of regulatory instruments Diana Hancock and Doriana
Ruffino
September 2017 Basel III monitoring report, www.bis.org/bcbs/publ/d416.htm
Impact of the revised minimum capital requirements for market risk Scott Nagel
Impact of the revised securitisation framework Bernardo D’Alessandro,
Thomas Morck and Emanuela
Piani
December 2017 Basel III monitoring report – Results of the cumulative quantitative impact
study, www.bis.org/bcbs/publ/d426.htm
March 2018 Basel III monitoring report, www.bis.org/bcbs/publ/d433.htm
Impact of the revised securitisation framework Bernardo D’Alessandro,
Thomas Morck and Emanuela
Piani
October 2018 Basel III monitoring report, www.bis.org/bcbs/publ/d449.htm
March 2019 Basel III monitoring report, www.bis.org/bcbs/publ/d461.htm.

Basel III Monitoring Report February 2023 117

September 2019 Basel III monitoring report, www.bis.org/bcbs/publ/d477.htm.
Counterparty credit risk and credit valuation adjustment risk Alexandra Gebauer, Evariste
Beigneux and Giulio Malberti
April 2020 Basel III monitoring report, www.bis.org/bcbs/publ/d500.htm.
Counterparty credit risk and credit valuation adjustment risk Thomas Blumentritt
December 2020 Basel III monitoring report, www.bis.org/bcbs/publ/d512.htm.
Counterparty credit risk and credit valuation adjustment risk Thomas Blumentritt and
Alexandra Gebauer
September 2021 Basel III monitoring report, www.bis.org/bcbs/publ/d524.htm.
Exclusions from the leverage ratio exposure measure due to Covid-19 Renzo Corrias
February 2022 Basel III monitoring report, www.bis.org/bcbs/publ/d531.htm
September 2022 Basel III monitoring report, www.bis.org/bcbs/publ/d541.htm
Banks’ exposures to cryptoassets – a novel dataset Renzo Corrias
Capital buffers and total CET1 requirements including Pillar 2 Irina Barakova and Roberto
Ottolini

118 Basel III Monitoring Report February 2023