Basel III: Capital positioning on European banks
Laisi, Jani (2012)
Laisi, Jani
HAAGA-HELIA ammattikorkeakoulu
2012
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2012110214854
https://urn.fi/URN:NBN:fi:amk-2012110214854
Tiivistelmä
Banks have been at the centre of the financial crisis since 2008. Thus the European Commission introduced proposals to change the behaviour of European banks. In July 2011 the Commission decided to translate the Basel III regulation to form a new directive in Europe, CRD IV. As part of this the European Banking Authority published on 8th December the formal recommendation related to banks’ recapitalisation needs. The banks in the sample were required to strengthen their capital positions and meet the target of 9% Core Tier 1 capital ratio.
The main purpose of this research is to present the current capital positioning of Eu-ropean banks and analyse the development under the Basel regulations.
This research presents the development of the Basel Committee’s regulations and the Committee’s “from the one-size fits-all to a tailor-made approach” mind-set behind the development. The objective was also to analyse the requirements and the results of EBA’s capital exercise. Therefore deeper analysis was performed on risk-weighted assets as a part of the actions required in the capital exercise and also on the impacts of Basel III.
During six months information was collected through qualitative research.The theory was based on relevant academic publications. Quantitative data was acquired from the EBA’s and IMF’s reports. A couple of bank and financial authority representatives were also interviewed to provide a deeper analysis and to support the quantitative data.
The findings indicated that Basel III will have a clear impact on declining the capital ratios. Also, almost all the banks in the sample of the EBA’s capital exercise achieved the required target with a few exceptions. The Finnish banks proved to be on a sound basis with a slight advantage due to the current market situation. It was also indicated that with some exceptions European banks are quite wealthy and have a good capital adequacy situation. Hence, this will not be a problem when the implementation of new regulations begins.
The main purpose of this research is to present the current capital positioning of Eu-ropean banks and analyse the development under the Basel regulations.
This research presents the development of the Basel Committee’s regulations and the Committee’s “from the one-size fits-all to a tailor-made approach” mind-set behind the development. The objective was also to analyse the requirements and the results of EBA’s capital exercise. Therefore deeper analysis was performed on risk-weighted assets as a part of the actions required in the capital exercise and also on the impacts of Basel III.
During six months information was collected through qualitative research.The theory was based on relevant academic publications. Quantitative data was acquired from the EBA’s and IMF’s reports. A couple of bank and financial authority representatives were also interviewed to provide a deeper analysis and to support the quantitative data.
The findings indicated that Basel III will have a clear impact on declining the capital ratios. Also, almost all the banks in the sample of the EBA’s capital exercise achieved the required target with a few exceptions. The Finnish banks proved to be on a sound basis with a slight advantage due to the current market situation. It was also indicated that with some exceptions European banks are quite wealthy and have a good capital adequacy situation. Hence, this will not be a problem when the implementation of new regulations begins.