20211109_LargeModelST

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Importance of tailored assessment Difference in leverage ratio, funding costs and ROA in 2027 compared to current regulation Difference in leverage ratio, funding costs and ROA in 2027 following an increase in target capital ratios compared to current regulation Source: Budnik et al (2021) The growth-at-risk perspective on the system-wide impact of Basel III finalization in the euro area • Basel III triggers a permanent 1pp increase in the euro area leverage ratio; the effect is halved (and gradually diminishes) when an increase in regulatory capital happens via a proportional increase in regulatory capital ratios • A broad-based increase of risk weights (incl. those on generally lower risk weighted portfolios) limits banks’ ability to reduce the overall capital charges via portfolio composition 28 www.ecb.europa.eu ©
2021 and three EU Basel III implementation designs Three constant elements of the EU-specific design Three variants of the output floor with different treatment of P2 requirements and SRB buffers the application of SME supporting factors on top of the Basel SME preferential risk weight treatment CVA exemptions excluding the bank-specific historical loss component from the calculation of the capital for operational risk (ILM=1) Note: the presentation uses the updated EBA nomenclature i.e. main EU specific (OF approach 1), alternative EU-specific (OF approach 2), parallel stacks (OF approach 3) 29 www.ecb.europa.eu ©
Page 1 and 2: Large model stress testing Katarzyn
Page 3 and 4: What is the macro-micro model BEAST
Page 5 and 6: BEAST* high-level overview 19 euro
Page 7 and 8: Macro block • The dynamics of eco
Page 9 and 10: Banks' lending volumes Loan demand
Page 11 and 12: Prudential policies • CRDIV capit
Page 13 and 14: Differing simulation properties 13
Page 15 and 16: Perspective at the onset of COVID-1
Page 17 and 18: Narrative based selection GDP growt
Page 19 and 20: Lending impact Impact of policies o
Page 21 and 22: Background • The phase-in of Base
Page 23 and 24: Cost and benefit assessment so far
Page 25 and 26: Initial impact of Basel III finaliz
Page 27: Debt funding costs after transition
Page 31 and 32: Plain vanilla design and scenario s
Page 33 and 34: Benefits of EU-specific versus plai
Page 35 and 36: Conclusions: balancing costs and be
Page 37: Q&A 37 www.ecb.europa.eu ©

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