European Banking Federation study links EUR 102 billion rise in supervisory CET1 requirements to 90% of banks’ retained earnings from 2021 to 2024

The European Banking Federation published a study estimating that rising supervisory capital requirements beyond the Basel framework have absorbed most of the capital European banks generated internally over 2021 to 2024. Based on data from 15 European banks representing 66% of industry assets, the study finds that required Common Equity Tier 1 (CET1) capital stemming from supervisory discretion increased by EUR 102 billion over the period, while the Basel baseline remained steady. Across the sample, banks generated around EUR 112 billion in retained earnings over the last three years, of which EUR 102 billion was used to meet the higher requirements, leaving roughly EUR 10 billion for additional financing capacity. Using a European Central Bank (ECB) estimate that capital relief can translate into additional financing with a multiplier of about 15x, the EBF estimates this increase in capital requirements corresponded to more than EUR 1.5 trillion in blocked lending capacity. The EBF calls on policymakers to reverse what it describes as a trend of “gold-plating” capital requirements beyond the Basel baseline.