EU banks eye savings following Pillar 2 update

Pillar 2 add-ons will no longer have to be met using the highest quality capital by European Union banks once new regulations come into force, which could reduce lenders’ Common Equity Tier 1 (CET1) requirements by 90 basis points on average.

The fifth Capital Requirements Directive (CRD V) will align capital requirements under Pillar 2 with those under Pillar 1. Of banks’ total Pillar 2 requirements, 56% will need to be covered by CET1 capital, around 18% by additional Tier 1 (AT1) and about