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January 5, 2018

ECB increases Deutsche Bank’s minimum capital requirements

European Central Bank (ECB) has increased Deutsche Bank’s minimum capital holdings for this year after completing its 2017 Supervisory Review and Evaluation Process (SREP).

Under the new decision, the German banking major need to maintain a common equity tier one (CET1) capital ratio of at least 10.65% on a consolidated basis in 2018, much higher than its last year level of 9.52%.

The new CET 1 capital requirement features the minimum Pillar 1 requirement (4.50%); the Pillar 2 requirement (2.75%); the capital conservation buffer (1.875%); the countercyclical buffer (currently 0.02%); and global systemically important bank designation (1.50%).

Accordingly, corresponding 2018 requirements for Tier 1 capital ratio and Total capital ratio were also revised at 12.15% and 14.15% respectively.

As of 30 September last year, the bank’s consolidated capital ratios on a phase-in basis were 14.58% CET 1 capital, 17% Tier 1 capital and 18.7% Total capital.

In the annual supervisory review and evaluation process, ECB analyses the performance of individual banks in dealing with risks.

Under the Basel III banking regulations, all banks are required to hold a minimum of 4.5% of their risk-adjusted assets as common equity.

However, the regulatory authority sometimes asks important banks to hold more to avoid their collapse which in turn can lead to financial turmoil.

In its website, ECB stated that overall capital requirements will be largely stable from 2017 to 2018 but with different outcomes for individual banks.

Last month, Italian banking company UniCredit said that its capital requirement ratio was slashed.

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