RegionsEEAS&P cautions on further challenge for European banks

S&P cautions on further challenge for European banks

The latest assessment by the credit ratings agency suggests that most are well-positioned to meet global standards on leverage, but tougher requirements could lie ahead.

Europe’s leading banks look generally well-placed to meet global standards on leverage to be implemented at the start of 2018, according to data compiled by Standard & Poor’s (S&P) Global Market Intelligence.

However, the credit ratings agency (CRA) cautions that compliance could be tested should regulators implement buffers for the biggest banks.

S&P reports sample of European lenders with over €100bn in assets with available data showed that all had at least the 3% ratio of capital to total assets that the Basel III capital adequacy regime will require from 2018. All of the selected banks also posted double-digit common equity Tier 1 ratios, which measure capital as a share of risk-weighted assets.

Globally systemically important banks (G-SIBs) will have to go beyond the 3% Basel minimum, but the format and quantum of the additional requirement have yet to be finalized.

Among the questions is whether banks will be set a higher minimum requirement or a buffer that would allow supervisors to impose restrictions in the event of a breach, notes S&P.

The Basel Committee on Banking Supervision (BCBS) is also yet to determine whether the add-on will be uniform for all G-SIBs or scaled based on the “buckets” used to calculate similar surcharges for the Core Tier 1 (CET1) ratio.

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