The Basel Committee on Banking Supervision’s 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 2022) includes the impact of the finalised Basel III reform package endorsed by the Basel Committee in December 2017. As in the previous year, the statistical annex also contains estimates relating to the European Commission’s implementation proposal.

Results of the Basel III monitoring exercise for German banks as at 31 December 2022

• The increase in minimum required capital (MRC) resulting from the phase-in of the finalised Basel III reform package is 13.5% at this reporting date. As observed on previous reporting dates, the increase for Group 1 banks is significantly higher, at 14.8%, than for Group 2 banks, which merely report a 9.9% increase. The increase in MRC is down (-3.2 percentage points) from the previous year. This is due, in particular, to a modification to the methodology for calculating RWAs for operational risk. 
• The output floor remains the main driver of the increase in German banks’ MRC. Across all institutions in the sample, the impact of the output floor increases from 0.0% (with an output floor of 50% in 2025) to 12.5% during phase-in, with a target of 72.5% in 2030. The impact of the output floor for Group 1 banks is 13.7%, a higher figure than that for Group 2 banks, at 9.0%. In 2025, the output floor will not represent the binding capital requirement for any institution in the sample; once it has been fully phased in, it will be the binding capital requirement for 28% of the institutions in the sample. 
• With the finalised Basel III reform package fully phased in, as the MRC increases, the Common Equity Tier 1 (CET 1) capital ratio will decline to 13.6% from the current level of 16.8%. The leverage ratio requirement has been fully implemented since June 2021 and stands at 5.8% for the institutions in the sample. 
• Taking into account the preliminary agreement on the implementation of the Basel III reforms in the EU, the increase in MRC after phase-in of the output floor will diminish to 3.1% in 2030. Once all transitional arrangements have expired, the increase in MRC is projected to come to 10.3%. By extrapolating these changes in MRC to the German banking market as a whole, the increase in MRC is estimated to be roughly 2% for 2030 and roughly 7% for 2033.