Bank capital ratios increased before Basel III rules came into force
Following the Global Financial Crisis, US banks on average increased their capital ratios well before Basel III reforms required them to do so, according to a new report from the Federal Reserve Bank of Cleveland.
Larger and better-capitalized banks typically increased their capital ratios before smaller and less-well-capitalized banks, but on average banks of all sizes increased their regulatory capital ratios notably between 2009 and 2012. By then, average tier 1 capital ratios comfortably exceeded higher requirements tied to Basel III, which went into effect starting in 2015.
“This series of events is consistent with the view that banks increased their capital ratios preemptively rather than waiting until the rules were binding,” writes Jan-Peter Siedlarek, a research economist at the Cleveland Fed.
Read the Economic Commentary: The Evolution of US Bank Capital around the Implementation of Basel III
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Media contact
Chuck Soder, chuck.soder@clev.frb.org, 216.672.2798
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