The Bank for International Settlements reported that risk-based capital and leverage ratios remained stable for large internationally active banks in the second half of 2025. The data, collected as of December 31, 2025, indicates that while capital metrics held steady, liquidity indicators diverged: the weighted average Liquidity Coverage Ratio increased to 136.6%, whereas the Net Stable Funding Ratio decreased slightly to 123.3%. All sampled banks maintained both ratios above the 100% minimum requirement.
The exercise covers 149 banks, including 106 Group 1 institutions with Tier 1 capital exceeding €3 billion, among which are 29 global systemically important banks. The impact of the fully phased-in Basel III framework on Group 1 Tier 1 minimum required capital rose to +2.2%, up from +1.7% in June 2025, a change attributed to an expanded sample size rather than deteriorating conditions. Regulatory capital shortfalls for Group 1 banks totaled €1.2 billion, compared to €0.9 billion in the previous period. These figures reflect current jurisdictional standards and assume full application of Basel III reforms without accounting for transitional arrangements expiring in January 2028.
The divergence between rising Liquidity Coverage Ratios and falling Net Stable Funding Ratios suggests that major banks are optimizing for short-term resilience against immediate outflows while potentially facing tighter constraints on long-term structural funding stability. Although all institutions remain comfortably above regulatory minima, the slight decline in NSFR indicates that the composition of liabilities or asset maturity profiles may be shifting in ways that reduce the buffer against prolonged stress scenarios. This dynamic requires close attention as it reflects how banks are balancing operational flexibility with compliance under the evolving Basel III implementation landscape.
From a market structure perspective, the increase in the calculated impact of fully phased-in requirements to +2.2% highlights the ongoing adjustment costs associated with finalizing the Basel III reforms. While the absolute shortfall amount remains modest relative to total industry capital, the upward trend in required capital impacts driven by broader sampling underscores the complexity of achieving uniform global standards. Institutions must navigate these incremental tightening measures carefully, particularly as transitional arrangements expire in 2028, ensuring that liquidity management strategies align with both short-term coverage demands and long-term funding stability objectives.
