Year in data 2015: Basel III Common Equity tier 1

By:
Published on:

Banks still need more capital.

2015 began and ended with big banks raising equity capital. In the first full working week of January, Santander completed an $8.9 billion accelerated bookbuild, in what proved to be the largest deal from any bank in 2015. 

In December, Credit Suisse, another capital laggard, was in the market with its $6.4 billion combined placement and rights issue and Standard Chartered completed a $5.1 billion rights issue, leaving only Deutsche of those leading European banks to have appointed new CEOs in 2015 seeking to right itself without tapping shareholders.

Between January and December bank issuers were not busy in the equity capital markets, but were cutting risk-weighted assets (RWAs). Reported data show that from a sample of 15, or half of the world’s largest 30 G-Sib banks, 13 increased their fully loaded Basel III common equity tier 1 ratios between the third quarter of 2014 and the third quarter of 2015. The 13 increased their ratios by 65 basis points on average and the 15 banks as a whole boosted it by 41bp.

The three largest US universal banks, JPMorgan, Bank of America and Citi, had all settled at around 11.5%, with Deutsche, Barclays and HSBC among the big Europeans also converging on that mark.

The regulators are likely to maintain the pressure on the banks. They may need to continue cutting RWAs this year to strengthen capital ratios further as regulators turn their focus onto counter-cyclical buffers above an effective minimum CET1 of 11%. 

As 2015 drew to a close, analysts were already suggesting that European banks may need to go to 12% CET1 ratios this year.

chart-basel-iii