Full output floor would cut average CET1 ratio by 70bp
Phased-in Basel III rules would add over €500bn to RWAs at 64 European banks in downturn
A fully phased-in output floor would have slashed European banks’ capital ratios by 70 basis points on average under the adverse scenario used in the latest European Banking Authority (EBA) stress test.
The floor, which caps internally modelled risk-weighted assets (RWAs) at 72.5% of the standardised approach figure, took effect in the European Union on January 1, 2025. It will climb from its
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