Small banks set for 2% capital reduction under Basel III

Lower leverage ratio requirements expected to offset Tier 1 capital increases for credit risk and output floor

Small banks are expected to see their Tier 1 capital requirements drop by 2% under the fully loaded Basel III rules compared with end-June 2022 levels, figures from the latest Basel Committee on Banking Supervision monitoring report shows. This compares with a previously estimated 5.7% increase in their minimum required capital (MRC) using end-2021 figures.

The average capital drop for Group 2 banks – those with less than €3 billion ($3.2 billion) in Tier 1 capital – is driven largely by a

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