Following today’s publication of the EBA’s updated assessment of the impact on the capital requirements of Europe’s banks from implementing the December 2017 Basel III agreement in Europe, Michael Lever, AFME’s Managing Director, Prudential, said:
“The EBA’s evaluation shows Europe’s largest banks, which account for most of the region’s assets, are still facing an increase of approximately 20% in their capital requirements from the European implementation of Basel III. Moreover, this estimate is based on 2019 data which is likely to be nearly18 months out of date by the time the European Commission issues its CRR3 proposal implementing the Basel agreement next year.
“In addition, the EBA’s analysis excludes any detailed quantification of the financial impact from the Covid-19 pandemic, although its simulations suggest further material increases in capital shortfalls. As a result, it is highly likely that today’s report underestimates the full impact on banks’ balance beyond that resulting from the finalisation of Basel III and further undermines the G20 and EU commitment of no significant capital increases from the finalisation of the post 2008 crisis regulatory framework.
“This makes it imperative that the Commission commits to undertaking a further evaluation of the combined impacts of Basel III implementation and Covid-19 on banks’ capital requirements based year-end 2020 data, or later, before the CRR3 proposal is finalised.”
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