The Basel Committee on Banking Supervision’s (BCBS) Basel III monitoring exercise started studying the impact of the capital requirements and new liquidity standards on selected banks in 2011. It is conducted semi-annually at the end of December and the end of June. Amongst other things, this exercise monitors banks’ behavioural responses to forthcoming regulatory adjustments and estimates the changes in Tier 1 capital requirements under fully phased-in frameworks. The statistical annex for the current reporting date (31 December 2023) includes the impact of the finalised Basel III reform package endorsed by the BCBS in December 2017. As in the previous year, the statistical annex also contains estimates relating to implementation in the EU.

Results of the Basel III monitoring exercise for German banks as at 31 December 2023

• The impact of implementing the Basel III reforms in the EU by way of CRR III/CRD VI on minimum required capital (MRC) is 3.3% after the phase-in of the output floor in 2030. The impact increases to 10.9% once all transitional arrangements come to an end in 2033, considering O-SII buffers, CCyB, and P2R. By extrapolating these changes in MRC to the German banking market as a whole, the increase in MRC is estimated to be around 4% for 2030 and around 8% for 2033.
• Once all transitional arrangements cease to apply in 2023, the output floor will have the largest overall effect in the EU implementation with an impact of 11.5%. After the full phase-in and with transitional arrangements, the impact of the output floor in 2030 will initially come to 3.7%. At the start of the phase-in period in 2025, the output floor has no binding effect for any institution in the sample, and the total increase in tier 1 capital requirements comes to 1.2%.
• In the EU implementation, retaining EU exemptions relating to CVA risk and reduced requirements in the context of securities financing transactions (SFTs) have the greatest mitigating effect. Among the transitional arrangements, the hybrid approach to the treatment of unrated corporates particularly reduces the impact until 2033.
• The increase in minimum required capital (MRC) resulting from a full implementation of the finalised Basel III reform package (without considering O-SII buffers, CCyB, and P2R) is 8.7% at this reporting date. The increase in MRC is down 4.8 percentage points from the previous year. Unlike at previous reporting dates, the increase for Group 1 institutions (8.6%) is smaller than for Group 2 institutions (9.2%). One reason for these changes as against the previous year is the 2023 introduction of the G-SII buffer for the leverage ratio in the EU. This requirement is taken into account for the first time at this reporting date, which increases the capital requirements for the relevant institutions under the current rules.
• Under a full implementation of the Basel III framework, the output floor remains the main driver for the increase in MRC for German institutions’. During the phase-in period, with the output floor going from 50% in 2025 to its target level of 72.5% in 2030, the impact of the output floor increases from 0.0% to 12.7%. The impact of the output floor for Group 1 banks is 13.3%, a higher figure than that for Group 2 banks, at 10.8%. In 2025, the output floor will not represent the binding capital requirement for any institution in the sample; once fully phased in, it would be the binding capital requirement for just under one-third of the institutions in the sample.
• With the finalised Basel III reform package being fully implemented, as a result of the increase in MRC, the common equity tier 1 (CET1) capital ratio would decline to 14.0% from the current level of 17.7%. The leverage ratio requirement has been fully implemented since June 2021 and stands at 6.0% for the institutions in the sample.