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The preliminary impact of the Basel reforms on EU banks' capital

The preliminary impact of the Basel reforms on EU banks' capital

On the 4th October 2018 the European Banking Authority (EBA) published a report which measures the impact of implementing Basel III reforms.

Overall the EBA concludes, that the results of the Basel III capital monitoring, based on data as of 31 December 2017, show that European banks' minimum Tier 1 capital requirement would increase by 16.7% at the full implementation date. The impact of the risk-based reforms is 21.8%, of which the leading factors are the output floor (6.3%) and operational risk (5.7%). The leverage ratio is the constraining (i.e. the highest) Tier 1 requirement for some banks in the sample, explaining why part of the increase in the risk-based capital metric (-5.1%) is not to be accounted as an actual increase of the overall Tier 1 requirement.

The EBA is currently working on a more detailed report on the impact of the reforms.