Big Banks Upgrade Basel III Projections

Several big banks have upgraded the estimates of their capital positions for the second quarter in excess of the minimum passing grade of 7 percent under the new Basel III guidelines, according to a new report from SNL Financial.

The Basel III guidelines were developed by the Basel Committee on Banking Supervision as an international regulatory standard to test bank capital adequacy and liquidity risk. The guidelines began to go into effect in 2011 and will continue to phase in through 2019.

According to SNL research, many banks projected an increase in Tier 1 common ratios. Bank of America previously expected a Tier 1 common ratio of 7.5 percent by the end of the 2012, but the company exceeded those expectations and reported second-quarter Tier 1 common ratio value of 8.1 percent under the new guidelines, reported SNL. Meanwhile, JPMorgan Chase, the largest U.S. bank by assets, reported an estimated Tier 1 common ratio value of 7.9 percent, 30 basis points lower than its estimate at the end of the first quarter.

Citigroup's estimated Tier 1 common ratio under Basel III also rose to 7.9 percent, while Wells Fargo & Co.'s estimated Tier 1 common ratio remained unchanged from the prior quarter, at 7.8 percent. Though Citigroup estimated a greater Tier 1 common ratio quarter-over-quarter, its estimate is 4.8 percentage points lower than its Tier 1 common ratio under the current guidelines, said SNL.

[See Also: Basel III: What Will It Mean and By When?]

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio