Basel III Monitoring Report: Key Insights.

This briefing document synthesizes the key findings from the Basel Committee on Banking Supervision's (BCBS) November 2025 monitoring report, which presents data as of 31 December 2024. The analysis covers a sample of 176 banks, including 116 large, internationally active "Group 1" banks and 59 "Group 2" banks. The findings assume full implementation of the Basel III framework and do not account for bank‑specific behavioral responses or Pillar 2 capital requirements.

Executive Summary

As of the end of 2024, the global banking system, particularly large internationally active banks (Group 1), demonstrates continued strengthening of its capital base. Risk‑based capital ratios increased during the second half of the year, while leverage and funding ratios remained stable. For the first time, the sample reported no regulatory capital shortfalls under the fully phased‑in final Basel III standards. However, a small number of G‑SIBs reported a total loss‑absorbing capacity (TLAC) shortfall.

A critical area of focus is the evolving nature of operational risk capital. While the share of Minimum Required Capital (MRC) allocated to operational risk has recently declined due to the "fading out" of losses from the 2008 Great Financial Crisis, the report explicitly warns that losses from the Covid‑19 pandemic have not yet had a significant impact but "may be the case in the near future." This suggests a potential for future increases in operational risk capital requirements as these loss events are fully incorporated into models.

Key Metrics Overview (as of 31 December 2024)

The following table summarizes the headline metrics for Group 1 banks, Global Systemically Important Banks (G‑SIBs), and Group 2 banks, comparing the current period with the previous one.

Capital Adequacy and Profitability

Current Capital Ratios

In the second half of 2024, the capital position of large banks improved significantly.

• Group 1 Banks: The average Common Equity Tier 1 (CET1) capital ratio under the initial Basel III framework increased from 13.4% to 14.0%. This was primarily driven by capital increases outpacings the growth in risk‑weighted assets (RWA). Using a balanced data set, the CET1 ratio stood at 14.3%.
• Regional Trends: The increase in Tier 1 capital ratios was most pronounced in the Americas, which saw a rise of 127 basis points in H2 2024. While European banks currently exhibit higher Tier 1 ratios than those in the Americas and the rest of the world, this is a reversal of the trend observed from 2011 to 2014.
• Capital Growth: Since June 2011, the CET1 capital level of Group 1 banks has increased by 146%, from €1,357 billion to €3,336 billion.

Impact of Final Basel III Framework (2028)

The full implementation of the finalized Basel III standards is projected to have a manageable impact on overall capital requirements.

• Change in MRC: For Group 1 banks, Tier 1 MRC is expected to increase by 1.4%. This net effect is composed of a 2.7% increase from risk‑based requirements, partially offset by a 1.4% reduction from leverage ratio requirements. The main drivers of the risk‑based increase are the output floor (+1.7%), market risk (+1.2%), and credit risk (+0.5%).
• Regional Variation: The impact on MRC varies significantly by region. European banks face the largest increase at +2.5%, while the Americas (+0.9%) and the rest of the world (+1.1%) see a more moderate impact.
• Group 2 Banks: The overall impact is a 1.3% increase in Tier 1 MRC, driven mainly by the output floor (+3.0%) and credit risk (+0.8%), which is partially offset by a reduction in leverage ratio MRC (–3.5%).

Capital Shortfalls

For the reporting date of 31 December 2024, no banks in the sample reported a regulatory capital shortfall under the fully phased‑in final Basel III standards.

• Total Loss‑Absorbing Capacity (TLAC): Among the 20 G‑SIBs reporting TLAC data, an aggregate shortfall of €5.7 billion was reported against the 2022 minimum TLAC requirements.

Profitability and Dividends

• Profits: After‑tax profits for Group 1 banks increased to €245.1 billion in H2 2024, though this remains below the peak observed in June 2023. Annual profits increased in the Americas (+20.4%) but declined in Europe (–1.4%) and the rest of the world (–16.4%) compared to the 12‑month period ending December 2023.
• Dividend Payouts: The dividend payout ratio for Group 1 banks stood at 39.6%, an increase of 153 basis points from the previous period. Payout ratios are now at pre‑pandemic levels in Europe and the rest of the world.

Operational Risk: A Critical Watchpoint

The report provides crucial insights into the dynamics of operational risk capital, highlighting a trend that warrants close attention from risk managers.

Evolution of Operational Risk MRC

The share of operational risk in total Minimum Required Capital (MRC) has been volatile, reflecting the long‑tail nature of significant loss events.

• Historical Trend: For Group 1 banks, operational risk's share of MRC increased dramatically from 8.7% in June 2011 to a peak of 18.5% at the end of 2018. It has since decreased to 16.0% as of December 2024.
• Driving Factors: The report attributes the initial surge to "the number and severity of operational risk events during and after the financial crisis." The recent decline is explained by the "fading out" of these Great Financial Crisis losses from the 10‑year data window used in calculations under the Advanced Measurement Approach (AMA).

Future Outlook and Potential Impacts

While historical losses are rolling off, the report contains a significant forward‑looking statement regarding emerging risks:

"In contrast, losses triggered by the Covid‑19 pandemic are not yet having a significant impact on the loss severity level, but this may be the case in the near future."

This warning suggests that as the full financial impact of pandemic‑related operational risk events (e.g., fraud, litigation, system failures) crystallizes, banks could see a renewed increase in MRC for operational risk.

Important Regulatory Nuances

The analysis of the final Basel III framework's impact on MRC comes with a key caveat for operational risk: "Operational risk figures may not show supervisor‑imposed capital add‑ons under Pillar 2. Therefore, changes in MRC may be overestimated." Risk managers should consider that the reported figures represent a baseline and that firm‑specific supervisory assessments may result in higher effective capital requirements.

Leverage Ratio

The Basel III leverage ratio remained stable for large internationally active banks in the second half of 2024, halting a decrease that began at the end of 2021.

• Average Ratios: As of December 2024, the average fully phased‑in final Basel III Tier 1 leverage ratios were 6.2% for Group 1 banks, 6.0% for G‑SIBs, and 6.5% for Group 2 banks.
• Regional Comparison: Significant regional disparities persist. Group 1 banks in the rest of the world have the highest average ratio (7.1%), followed by the Americas (5.8%), with Europe reporting the lowest (5.1%).

Liquidity Risk Management

Liquidity metrics show a robust position across the banking sector, although minor vulnerabilities were observed.

Liquidity Coverage Ratio (LCR)

• Average LCR: The weighted average LCR was 134.8% for Group 1 banks and a very high 200.8% for Group 2 banks.
• Shortfalls: Three Group 1 banks reported an LCR below the 100% minimum threshold. The aggregate shortfall for these banks amounted to €17.8 billion.
• Recent Trends: For a balanced sample of Group 1 banks, the average LCR decreased slightly from 135.0% to 133.2%, which the report attributes mainly to an increase in net cash outflows.

Net Stable Funding Ratio (NSFR)

• Average NSFR: The weighted average NSFR was 123.7% for Group 1 banks and 135.2% for Group 2 banks.
• Shortfalls: All banks in the sample, across both groups, reported an NSFR that exceeded the 100% minimum requirement.
• Recent Trends: The average NSFR for Group 1 banks was stable, while for Group 2 banks it increased by 5.2 percentage points to 137.1% compared to the previous period.