BaselIIIMonitoringReportSeptember2022107IrinaBarakovaSecretariatoftheBaselCommitteeankingSupervisionRobertoOttoliniankforInternationalSettlementsCapitalbuffersandtotalCET1requirementsincludingPillar21.IntroductionTheBaselIIIreformsintroducedseveralcapitalbuffersontopoftheminimum4.5%CET1ratiotototalrisk-weightedassets(RWA).Someofthebuffersarejurisdictionalandbank-specific,suchasthecountercyclicalcapitalbuffer(CCyB),whichdependsonthebank’sgeographicfootprintandjurisdictionalpoliciesandreciprocity.Inaddition,supervisorscouldrequirefurtherCET1capitalunderPillar258oftheBaselIIIframework,thatcouldalsovaryacrossbanks.PriorBaselIIImonitoringreportshaveincludedonlythecapitalconservationbuffer(CCoB)andG-SIBbuffersintheanalyses.ThisspecialfeatureisthefirsttoincludeanyadditionalCET1capitalrequirementsunderPillar2,anyotherPillar1requirementssuchashigherlossabsorbencyrequirementsfordomesticsystemicallyimportantbanks,andanycountercyclicalcapitalbufferrequirements.Thesupervisoryreportingsystem(SRS)datasetwasonlyrecentlyaugmentedwithinformationontotalCET1requirementsincludingPillar2.59Theinformation,however,wasalsobackfilledasapplicableforeachjurisdiction.Thus,itisnowpossibletocalculateforeachbankCET1capitalsurplusresultingfromtherisk-weightedcapitalstackasthedifferencebetweentheamountoftotalCET1capitalheldandthetotalrequiredamountofCET1.Notethatrisk-basedcapitalrequirementswerespecificallydefinedbasedonCET1capitalonlyinthepost-crisisreforms.Furthermore,thebufferframeworkwasintroducedinsubsequentyearswithafullyphased-intargetof2019.60Jurisdictionalimplementationofallthesecomponentsvariedaswell.61Sincetheadditionaldataonbuffersaresparsepriorto2017,withmostcoveragestartingin2019,andforbroadestconsistencyofthetotalCET1requirementsmeasure,wefocusonthemorerecentdatainthissection.Notethattheotherrisk-basedcapitalrequirementsanalysesinthisandpriorreportsarebasedonTier1capitalrequirements,ratherthanCET1.Thisisafirstviewofrisk-basedcapitalinCET1terms,itscomponentsandhowtheycompareacrosssegmentsofglobalbanksandregions.Thedataavailabilityissufficienttoprovideasystemwideview,althoughthesetofbanksisslightlysmallerthaninthebroaderreportduetodataquality.58Formoredetails,see/bcbs/publ/d465.htm.59Thedatawereaddedintheend-June2021exercise,butsignificantlyimprovedonlywiththeend-December2021datacollection.ThesedataareusedfortheCommittee’sBaselIIIreformsevaluationwork.60SeeBoxAearlierinthereport.61FormoredetailontherateofjurisdictionalimplementationseetheBCBSImplementationreportsanddashboard/bcbs/implementation/rcap_reports.htm.08BaselIIIMonitoringReportSeptember20222.TotalCET1requirementsinrelationtoactualCET1capitalInthissectionweanalysetheevolutionoftheCET1capitalstacktofulfilthevariousrequirementsandbuffersintheperiodaroundtheCovid-19pandemicfortheglobalbankingsystem.Theperiodbetween2019and2021includesbetterdatacoverageaswellastemporarychangesinCET1requirementsduetoCovid-19relatedmeasures.62Thedecreaseinsomebuffersinearly2020,includingCCyBbutalsoCCoBandPillar2,ledtosignificantcapitalrequirementreleases.Abalanceddatasetisdefinedtoshowtheevolutionthroughtime.63Furthermore,thefiguresarebasedonfullyphased-inbuffersandtotalCET1requirements.TheleftpanelofGraph1belowshowsthesharesofCET1capitalheldusedtofulfilthevariousrequirementsandbuffersovertime.ThebrownpartofthebarshowsthepercentageofsurplusCET1ontopofalltheCET1requirements.64TheredlinecorrespondstotheevolutionoftotalCET1requirement,includingPillar2,asapercentageofRWA.Thegraphshowsthatallthebufferscombinedhaveashareofaround35–39%,slightlylargerthantheoneoftheminimum4.5%requirement,whichaccountsforaroundonethird(33–35%)oftotalCET1.TheCCoBisthebufferrequiringthemostcapitalsystemwide,followedbytheG-SIBbuffers,otherPillar1buffers65andPillar2.TheCCyBisnegligibleatthebeginningoftheperiodevenbeforeanyreleases.WhiletheCET1requirementswerereducedinH12020acrossjurisdictionstohelpbanksmaintainlendingandsupporttheeconomyduringthepandemic,thegraphshowsthatrelativecapitalsurplushasalsoincreasedintheperiodaftertheonsetofthepandemic.TherightpanelpresentshowtotalCET1hasbeenincreasingforthesystemovertime.Thus,thesurplusincreaseisnotjustinrelativebutalsoabsoluteterms.TheaggregateCET1ratio(blueline)onlydropsbrieflyinH12020andoverallkeepsanupwardtrend,unliketheCET1requirement(redline)whichremainslowerfortheperiodsaftertheinitialreleaseinH12020.62See/press/p200320.htm.63Thebalanceddatasetconsistsof94banksofwhich56areGroup1banks,26areG-SIBsand38areGroup2banks.64NotethatabankcoulduseitsCET1surplustofulfilTier1ortotalcapitalrequirements.Therefore,theeffectiveCET1surplus,whenconsideringalsoothercapitalrequirementsthatapplyinparalleltotheriskweightedcapitalrequirements,mightbesmaller.65OtherPillar1buffersincludeanyadditionalCET1requirementderivingfromD-SIBbuffers,othersystemicbuffersandanyotheradditivecapitalrequirements.BaselIIIMonitoringReportSeptember2022109stackfCETcapitalheld1101009.8809.6609.4409.22090H12019H22019H12020H22020H12021H22021TotalCET1requirementinpercentofRWA(lhs)MinimumrequirementCapitalconservationbu?erG-SIBbu?erCountercyclicalcapitalbu?erss4413.533212.5120H12019H22019H12020H22020H12021H22021CET1ratio(lhs)OtherPillar1requirementsPillar2requirementsCET1surplusSource:BaselCommitteeonBankingSupervision.SeetheExceldatafileforunderlyingdataandsamplesize.AnormalisedviewoftheCET1compositionisusedtocomparethebufferdynamicsbetweenbankgroupsinGraph2.Group1banksandG-SIBsexperienceregulatorybufferreleasesatthesametimeinH12020(seeredline).WhilerequirementsforG-SIBsquicklyrevertedclosertopre-pandemiclevelsin2021,requirementsforthebroaderGroup1arenotyetclosetopre-pandemiclevels.Asexpected,theG-SIBbufferaccountsforalargershareofCET1forG-SIBsratherthanforGroup1banks,anditisnotpresentforGroup2banks.Forthislattergroupofbanks,Pillar2takesupamuchlargershareofCET1capital.Consistentlyacrossallgroups,theCET1surplusincreasespostH12020,justasCET1requirementsdecreased.Thereisnoreversaltothetrendoflargersurplusevenasrequirementsarebeginningtoclimbupagain.10BaselIIIMonitoringReportSeptember2022lutionofCETstackinpercentofCETcapitalheldandtotalCETrequirementBybankgroupbalanceddatasetGraph2anks1001008.6040208060118H12019H22019H12020H22020H12021H22021MinimumrequirementCapitalconservationbu?erG-SIBbu?er1001008.6040208060118H12019H22019H12020H22020H12021H22021Countercyclicalcapitalbu?erOtherPillar1requirementsPillar2requirementsanks11110010.4809.8609.2408.62080H12019H22019H12020H22020H12021H22021CET1surplus TotalCET1requirementinpercentofRWA(lhs)Source:BaselCommitteeonBankingSupervision.SeetheExceldatafileforunderlyingdataandsamplesize.LookingacrossGroup1banksbyregions(Graph3),thedynamicsofbuffersandsurplusaroundthepandemicaresimilar,buttherelativesizeofCET1componentsdiffer.EuropeandrestoftheworldshowalargerportionofCET1surplusthantheAmericas.Moreover,Pillar2ismuchlargerforEurope.WhiletheAmericashavehardlyanyPillar2CET1requirements,theCCoB,G-SIBbuffersandotherPillar1buffersaremuchmoresignificantthanintheotherregions.ThisisconsistentwiththefactthatintheUScapitalrequirementsresultingfromthestresstestingprogrammearereportedas“otherPillar1requirements”,whereasmanyothercountriesusestresstestingasaninputtoPillar2requirements.FortherestoftheworldallbuffersotherthanCCoBandG-SIBbufferhaveanegligibleshare,andthetotalshareofbuffersissmallercomparedtotheothertworegions.TheregionaldecompositionalsoshowsdifferencesintheoverallCET1requirementsdynamics,whichcontinuedtodecreaseinEuropeandincreasedsharplyintheAmericas66,whileremainingstableintherestoftheworld.However,theCET1surplusisconsistentlylargerafterH12020forallregions.SurplusesappeartohavethelargestshareofCET1intherestoftheworld.WhileCET1requirementsarelowestinthisregion,theactualCET1capitalratiosareattheleveloftheAmericas,asshowninGraph15(leftpanel)ofthemainreport.arepartiallydrivenbytheimplementationofamoreconservativenationalframeworkforbufferrequirementsintheUnitedStates.BaselIIIMonitoringReportSeptember2022111H12019H22019H12020H22020H12021H22021H12019H22019H12020H22020H12021H22021H12019H12019H22019H12020H22020H12021H22021H12019H22019H12020H22020H12021H22021H12019H22019H12020H22020H12021H220211110010.4809.8609.2408.620801008.6040208060118Group1banksbyregion,balanceddatasetGraph3ricasricas11008.6040208060118MinimumrequirementCapitalconservationbuMinimumrequirementCapitalconservationbu?erG-SIBbu?erCET1surplus TotalCET1requirementinpe