欧盟对大型银行的资本要求：低路还是高路（英）

PETERSONINSTITUTEFOR

INTERNATIONALECONOMICS

POLICYBRIEF

26-13EUCapitalRequirementsonMegabanks:TheLowRoadortheHighRoad

JuanMejino-LópezandNicolasVéron

August2026

Note:AnearlierversionofthispaperhasbeenpublishedbyBruegelasaworkingpaper.Fortheirsubstantialfeedback,theauthorsthankValerioBacchetti,RaviBalakrishnan,JesperBerg,SylvainBroyer,ClaudiaBuch,

FredrikBystedt,ChristopherCant,JacopoCarmassi,AliCavalla,Nicolas

Charnay,JamesChew,RebeccaChristie,LinasČiapas,TomDechaene,

SharonDonnery,ÉdouardFernandez-Bollo,AndreaFiltri,HansGeeroms,MichaelGibson,MartinGruenberg,PatrickHonohan,StefanIngves,DanielKapp,ChristineSifFuchsLarsen,KatjaLautar,ÁlvaroLópezBarceló,IvoMaes,StanMaes,CyprienMilea,RobertOphèle,CosimoPacciani,Peter

Palus,LauraParisi,BirgerBuchhavePoulsen,PeterPraet,Massimiliano

Rimarchi,EoinSheanon,GrahamSteele,KatjaTaipalus,JukkaTopi,ÁngelUbide,HaraldWaiglein,GuntramWolff,andIannaGeorgievaYordanova.

TheauthorsaregratefultoAdamPosenandJerominZettelmeyerfortheirencouragementandsupport.Opinionsexpressedaretheauthors’alone.

EXECUTIVESUMMARY

Inthesecondhalfof2026,bankingissuesareexpectedto

gainprominencewithinthebroaderEuropeanUnionSavings

andInvestmentsUnion(SIU)project,inparallelwithcontinueddiscussionsoncapitalmarketsreform.Wefocusoncapital

requirementsontheverylargestbanks,ormegabanks.We

considertheseintheirhistoricalcontextandcomparethemwiththoseforsimilarbanksintheUnitedStates,theEU’smainpeerbankingjurisdiction.Wefindthat,atend-2024,requirementsonUSmegabanksweregenerallystricterthanrequirementsonEU

JuanMejino-Lópezwasaresearch

analystatBruegel.

NicolasVéron

is

seniorfellowatthePetersonInstituteforInternational

Economics

andBruegel.

1750MassachusettsAvenue,NW|Washington,DC20036-1903USA+1.202.328.9000|

PB26-13|AUGUST20262

megabanksandtheminimumlevelsundertheBaselFramework,inlinewithlongstandingUSpractice.

Wealsofindamarkedchangebyend-2025underthesecondTrumpadministration,erasingmuchofthepriordiscrepancy

betweenEUandUSrequirements.Evenso,atthispointtheUSisnotactuallyundercuttingEUrequirementsandistherefore

notcreatingcripplingcompetitivepressuresforEUmegabanks.

Furthermore,somecurrentUSbanking-sectorpoliciesarereckless,followinga“lowroad”ofderegulationanddesupervision,or

reducedsupervision,thatincreasessystemicriskratherthanlong-termcompetitiveness.

Historysuggeststhatthelowroadleadstoruin.EU

policymakersmustinsteadaddresslingeringEUbankingpolicy

fragmentation,evenwithintheeuroarea,andtackletheroots

ofcurrentcomplexityincapitalrequirementsandinbanking

regulationmoregenerally.Buildingonthesuccessesofintegratedeuroareamicroprudentialbanksupervision,theEUshouldaim

atsimilarintegrationofmacroprudentialbankpolicyandcrisis

response,whilemoreconsistentlysupportingtheBaselFrameworktohelpmitigatefutureinternationalsystemicshocks.

1.CAPITALREQUIREMENTSONMEGABANKSWITHINEUBANKINGPOLICY

Banking-sectorreformiscomingbackontotheEuropeanUnion

agenda,afterafewcomparativelyquietyears.TheEUfacesseveralinterrelatedchallenges,includingthelingeringfragmentationof

theEUbankingpolicyframeworkalongnationallines;fragilities

andinefficienciesresultingfromtheincompletenessoftheeuro

area’sbankingunion;andthegenerallyexcessivecomplexityofitsprudentialframework,shapedbymultipleroundsofreforms.

Simultaneously,somebanking-sectoradvocatespushfor

lowercapitalrequirements.Whilesuchdiscourseechoesmanypreviousepisodes,ithasreachedahighlevelofintensity,whichsomeadvocatesimplyisjustifiedbycompetitivepressuresfromtheUnitedStates.

TheEuropeanCommissionplansanewphaseofdebatesandnegotiationsfollowingitsreportonthestateoftheEUbanking

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systempublishedinmid-July(EuropeanCommission2026).

Legislativeproposalsareexpectedinearly2027,withtheaimof

finalizingthecorrespondingactsbytheendofthecurrentEUterm,inspring2029.

TherequirementfortheCommissiontoproducethebanking

competitivenessreportwasstipulatedinthelastroundofbank

capitallegislationin2024,withadeadlinethensetatlate-2028.1InitsMarch2025communicationonSavingsandInvestmentsUnion(SIU),theCommissionhadbroughtthatdeadlineforwardtwoyears(EuropeanCommission2025).Inthemeantime,theCommission

madeitincreasinglyexplicitthatthereportwouldincludeanefforttorevivethegoalofcompletingthebankingunion,namelythe

ambitiousreformprojectinitiatedinmid-2012andmemorably

definedthenasthe“imperativetobreaktheviciouscirclebetweenbanksandsovereigns.”2

Inthiscontext,thisPolicyBriefsurveystheevolvingtransatlanticlandscapeandmakesrecommendationsforpolicypriorities.We

firstexplainourfocus,includingourdefinitionofmegabanks,

1Article518coftheCRRreads:“By31December2028,the

Commissionshallassesstheoverallsituationofthebankingsysteminthesinglemarket,inclosecooperationwithEBAandtheECB,

andreporttotheEuropeanParliamentandtotheCouncilonthe

appropriatenessoftheUnionregulatoryandsupervisoryframeworksforbanking,Thatreportshalltakestockofthereformstothe

bankingsectorwhichtookplaceafterthegreatfinancialcrisis

andassesswhethertheseensureanadequatelevelofdepositor

protectionandsafeguardfinancialstabilityatMemberState,

bankingunionandUnionlevel,Thatreportshallalsoconsiderall

bankinguniondimensions,aswellastheimplementationofthe

outputflooraspartofcapitalandliquidityrequirementsmore

generally,Inthatregard,theCommissionshalldulyconsiderthe

correspondingstatementsandconclusionsonthebankingunionofboththeEuropeanParliamentandtheEuropeanCouncil,”

2Thequoteisfromtheseminal

euroareasummitstatement

ofJune

29,2012.Ontheoriginsandearlyimplementationofthebanking

unionproject,seeVéron(2024).Onearlyindicationsthatthe

Commissionreportwouldaimatcompletingthebankingunion,seeMartinArnoldandPaolaTamma,“

Brusselstorevivecampaignfor

bankdepositguaranteescheme

,”FinancialTimes,February9,2026.

PB26-13|AUGUST20264

andhowitfitswithinthebroadercurrentagendaofEUbankingpolicyreform.

Section2

summarizeshowEUcapitalrequirementshavecomparedwiththeglobalreferencestandards(theBasel

Framework)andtheUSbenchmark,uptotheendoftheBidenadministration.

Section3

summarizesandassessesongoing

USbanking-sectorpolicychangesunderthesecondTrump

administration.

Section4

describespolicytradeoffsandformulatesrecommendationsforEUdecisionstocome.Sincebankingpolicyisahigh-jargonarea,somekeyconceptsandexpressionsare

explainedinthe

appendix

,followedbya

glossary

ofacronyms.

1.1.TheEUbankingpolicyagenda

ThechallengesfacedbyEUbankingpolicymakersboildowntothreeinterrelatedthemes.

1Completingthebankingunionisthemostimportantand

arguablymostcontentiousitem.Asdefinedbyeuroarea

leadersin2012,thatmeansphasingoutthebank-sovereign

nexusintheeuroarea.Forittohappen,thecrisis-response

framework(includingbankresolution,depositinsurance,and

anyliquidityorsolvencysupportthatmightberequiredunder

crisiscircumstances)mustbeintegratedattheeuroarealevel,

whichwillinturnallowtheeliminationofcurrentpracticesby

memberstatesofring-fencingbankcapitalandliquidity(“home-hostissues”)thatpreventtheemergenceofagenuineinternal

marketforbankingservices.Topreventthecorresponding

risk-poolingfrombeingsubvertedbynationalgovernmentsto

undulyfacilitatetheirownborrowing,thecreationofaEuropeanbankcrisis-responseframeworkmustbecomplementedwith

capitalsurchargesthatdeterexcessivelyconcentrateddomesticsovereignexposures.3

2Streamliningcapitalrequirementscomesnextontheagenda,becausethecorrespondinglegislationandimplementation

3Correspondingpolicytradeoffsandrecommendationsaredetailedinsection5ofVéron(2024).ThefactthatanintegratedEuropeandepositguaranteeisnotenoughtoaddressthehome-hostissueswasalsoemphasizedbyDewatripontetal.(2021).Amongothers,Theurer(2026)providedsupporttosovereignconcentration

surcharges.

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practiceshavebecomemind-numbinglycomplexandcallforaredesign.Thetermsofthatredesign,however,arecontested.

Manybanking-sectoradvocatesviewitasanopportunityto

lowercapitalrequirements,amatterinwhichtheygenerally

haveadirectfinancialinterest.Europeanauthorities,by

contrast,haveemphasized“simplificationwithoutderegulation,”assertingthatoveralllevelsofcapital(andotherloss-

absorbency)requirementsshouldbebroadlymaintained,butthatthecomplexityinvolvedintheirsettingmustbereduced(e.g.,ECB2025b).

3Othersimplificationinitiativesareofteninvokedasan

imperative,butalsofrequentlyleftvaguebyadvocates.A

debatehasdevelopedabouttheincentivesofthethreemain

Europeanauthoritieswithcompetenceoverthebankingsector.ThesearetheEuropeanCentralBank(ECB),whichplaysthe

centralroleintheSingleSupervisoryMechanism(SSM)that

coversalleuroareabanks;theSingleResolutionBoard(SRB),entrustedwithcriticaldecisionsincaseoffailureofanyofthelargereuroareabanks;andtheEuropeanBankingAuthority

(EBA),whichsupportsregulatorydecision-makingbythe

EuropeanCommission,amongothertasks.4Thesimplificationagendamightalsobeextendedtoareasofbanking-sector

policythatdonotpertaindirectlytotheprudentialframework,suchasfinancialconsumerprotection.

1.2.Afocusonmegabanks

ThisPolicybriefdoesnotaimtocovertheentireEUbankingreformagendaassketchedabove.Instead,itfocusesonapartofitfor

whichweidentifyanurgentneedforfact-basedinput:capital

4OtherEUbodiesplayaroleinEUbanking-sectorpolicybutareless

centraltodiscussionsaboutsimplificationandcompetitiveness.

TheyincludetheEuropeanSystemicRiskBoard,whichprovides

inputstopolicymakersonmacroprudentialthemes;theAnti-MoneyLaunderingAuthority,currentlyinbuildupphase;andtheEuropeanStabilityMechanism,whoseproposedroleinbanking-sectorpolicyhasnotbeenratifiedbyallEUcountries,attimeofwriting.

PB26-13|AUGUST20266

requirements5onmegabanksandspecificallytheEU-UScomparisonintermsofgroup-levelrequirements.

Therearetwomainreasonsforthischoice.First,megabanks

accountforthebulkofdirecttransatlanticactivityandtransatlanticbank-levelcompetition.Forexample,asofmid-2025,thesevenEUmegabanks(asdefinedbelow)togetherrepresented66percentofaggregateassetsofallaffiliatesofEUbanksintheUS.6Therefore,argumentsaboutatransatlanticregulatory“levelplayingfield”

resonateforthesebanksmuchmorethanforothers.Second,

megabanksarehighlyvocalandhavegenerallyprivilegedaccesstopoliticalleadersandpolicymakers,sotheycollectivelysetmanyofthetermsofpublicdebatesaboutbankingonbothsidesof

theAtlantic.7

Wedefinemegabanksasthosethataresystemicallyimportantonagloballevelandholdaboveatrillionintotalassets,measuredrespectivelyinUSdollarsforUSbanksandineurosforEUbanks.8Ourdefinitionofglobalsystemicimportanceisabank’sdesignationasaGlobalSystemicallyImportantBank(GSIB)bytheFinancial

5Weusetheword“requirements”asshorthandforactual

requirements(whichabankmustcomplywithtoretainits

license),capitalbuffers(whichcanbereleasedinsomeadverse

circumstances)andcapital“guidance”whichistechnically

nonbindingbutwithwhichbanksgenerallycomply.Moredetailsinthe

appendix

.

6Basedonentity-leveldisclosuresatFederalReserve,“

StructureData

fortheU.S.OfficesofForeignBankingOrganizations

.”Sadly,no

equivalentdatasetappearstoexistinthepublicdomainontheEUside.

7See,forexample,theleakedletterfromseniorofficialsatthe

respectivefinanceministriesofGermany,FranceandItalyto

theirpeersattheEuropeanCommission,September24,2024,as

publishedbyPolitico

.

8Asemanticallymorerigorousapproachwoulddesignatesuchbanksas“terabanks”butweoptfor“megabanks”asthattermhasbeen

widelyusedinpastdebatesaboutverylargebanks,particularlyintheUnitedStates.Totalassetsareconsideredatend-2024,using

TheBankerdataset.Withreferencetoearlierdates,weusethetermmegabanksmorelooselytorefertotheverylargestbanksineachjurisdiction.

PB26-13|AUGUST20267

StabilityBoard(FSB).9Megabanksarethusdefinedasasubset

ofGSIBs,whichinturnareasubsetofthe“largeinternationally

activebanks”forwhichthesetofinternationalprudentialstandardsknownastheBaselFramework(setbytheBaselCommitteeon

BankingSupervision,see

appendix

)isspecificallyintended.10

Basedonthesedefinitions,therearecurrentlysevenmegabanksintheEU.Bydecreasingorderoftotalassets,theseare:

BNPParibas,CréditAgricole,Santander,BPCE,SociétéGénérale,

DeutscheBank,andING.11IntheUS,therearesix:JPMorganChase,BankofAmerica,Citigroup,WellsFargo,GoldmanSachs,and

MorganStanley.12Banksthatarelargebutnotmegabanks,ofwhich

9TheFSBhaspublishedanannuallistofGSIBssince2012,the

latestbeingFSB(2025).Thelisthasbeenstableoverrecentyears,includingeightUSGSIBsandsevenEUGSIBsoutofaglobaltotalof29.

10TheBaselCommitteehasneverprovidedaprecisedefinitionof

whatitviewsasalargeinternationallyactivebank,leavingthe

determinationtoeachindividualjurisdiction.TheUShasalways

adoptedarestrictiveinterpretationandimposedtheBasel

Frameworkonlyonitsverylargestbanks,excludingsomebanks

thatmightbeconsideredlargeandinternationallyactiveon

common-sensecriteria.Forexample,SiliconValleyBank,whichatthetimeofitsfailureinMarch2023wasamongthetoptwentyUSbanksbyassetsandhadanactivesubsidiaryintheUK,waslargelyexemptedfromtheBaselFrameworkunderUSrules.

11OurmegabankdefinitionthusincludesallsevenEUGSIBs.It

excludesCréditMutuel,whichhastotalassetsabove€1trillionbut

hasneverbeendesignatedasaGSIBandencompassesseveral

subgroupsthatoperatelargelyindependentlyfromeachother.

Germany’stwolargeIPS-boundbankingnetworks,theSparkassen-FinanzgruppeandtheGermanCooperativeBankingGroup,would

bothbeabovethetrillion-euroassetsthresholdifconsideredona

consolidatedbasis,butarenottreatedasintegratedgroupsinthe

EUprudentialframeworkandthereforenotincludedinourdefinitionofmegabanks.

12OurmegabankdefinitionthusincludessixoftheeightUSGSIBs.

ItexcludesBNYandStateStreet,whicharedesignatedasGSIBsmainlyfortheirspecializedrolesasglobalcustodians,butwhichhavesignificantlysmallerassets,respectively$416billionand

$353billion(atend-2024perTheBanker).

PB26-13|AUGUST20268

therearesignificantlymoreintheEUthanintheUS,13typicallydonotcompetehead-onwithpeersacrosstheAtlantic.14

1.3.Therestoftheagenda

Inchoosingourfocus,weconsciouslyskipdiscussionsonimportantpolicymattersthatinclude:

•Systemicriskassociatedwithnonbankfinancialinstitutions;15

13AgainusingTheBankerdatabaseatend-2024,wecount

11nonmegabankEUbankswithassetsabove$500billion(by

decreasingorderoftotalassets:CreditMutuel,IntesaSanpaolo,

UniCredit,BBVA,LaBanquePostale,DZBank,CaixaBank,

Rabobank,Nordea,Commerzbank,andDanskeBank)againstonlythreeUSgroupsinthesamerange(USBank,PNC,andTruist).

14InadditiontotheEUGSIBs,sixEUbanksreportedsizeableUS

assetsinthe$30billionto$70billionrangeasofmid-2025(BBVA,Commerzbank,Handelsbanken,LBBW,Rabobank,andSEB;again

basedonFederalReserve,“

StructureDatafortheU.S.Officesof

ForeignBankingOrganizations

”).Muchoftheseexposures,however,maybepresumedtoberelatedtotheirprovisionofglobalservicestoEU-basedcorporateclients.Ofthethreeabove-listedmid-sizedUSbanks,PNCandTruisthavenosubsidiaryintheEU;USBankhasanIrishsubsidiarywithlessthan€30billionintotalassets.

15Whilenonbankfinancialinstitutionscanplainlycontributeto

systemicrisk,theUSregionalbankingcrisisofMarch2023was

areminderthatsystemicfinancialinstabilityisoftenassociated

withbanking-sectorfragility.WewouldincludeUScreditunions

(technically“nonbanks”)inourdescriptivescopeintheUS,becauseoftheireconomicsimilaritywithcooperativebanksintheEU,but

therearenomegaentitiesinthatcategory.Until2008,broker-

dealersintheUSwereanothernonbanksegmenttooimportant

toignoreforthepurposesofsystemicriskanalysis,butinthat

yearthelargestbroker-dealerseitherdisappearedasstand-aloneentities(BearStearns,LehmanBrothers,MerrillLynch)orbecamebanks(GoldmanSachs,MorganStanley).Ouranalysisleavesasidegovernment-guaranteednonbankssuchasFannieMaeandFreddieMacintheUSandKfW,CaissedesDépôtsorCassaDepositie

PrestitiintheEU,forwhich(notunlikeChinesemegabanks)capitalrequirementsarelesscriticalgiventheexplicitpublicsponsorship.Wesimilarlyleaveasidecrypto-assetserviceprovidersand

nonbankstablecoinissuers,whosesignificancefromasystemicriskperspectiveremainslimited.

PB26-13|AUGUST20269

•Othercomponentsofthebankprudentialframeworkthancapitalrequirements,suchasliquidityandresolvability

requirements,stresstesting,orreportingobligations;

•JurisdictionsotherthantheEUandUS,someofwhichplaysignificantrolesintheglobalfinancialsystem;16

•Banksotherthanmegabanks,whichplayimportantrolesin

creditintermediationbuttypicallydonotdirectlycompeteonatransatlanticbasis;

•Capitalrequirementsatthesub-groupentitylevel,e.g.,ondeposit-takingsubsidiariesofmegabankgroups.17

ThefourthoftheabovepointsincludeswhatUSparlance

generallyreferstoastailoringandtheEUasproportionality,namelythedifferentiationofprudentialrequirementsbasedonabank’s

sizeandsystemicimportance.IntheEU,thesedebatesaremore

complexbecause,unlikeintheUS,mostsmallbanksparticipate

inmutualsupportarrangementssuchasinstitutionalprotection

schemes(IPSs),raisingdistinctconsiderationsaboutsystemicrisk.TheprominenceofIPSsinafewEUcountries,includingGermany,isthemainreasonwhytheEUhasalwayschosentoapplytheBaselFrameworktoallbanks,insteadofadoptingaformoftailoringas

16Inrecentyears,theEUandtheUShavebeenrespectivelythe

world’ssecond-andthird-largestbankingjurisdictionsmeasuredbytotalassets,withChinawellaheadofboth.TheChinesebanking

sector,however,isundertighttop-downparty-statecontrolanditsprudentialframeworkisthusfundamentallydifferentfromthoseoftheEUandUS,wheremostbanksarecommercialorganizationsthatcompeteonthemarketplace.Allotherjurisdictionsaresignificantlysmaller.Atend-2024andbasedonTheBankerdatabase,the

world’stop30banksbyassets(comparedatmarketexchange

rates)included10fromChina,sevenfromtheEU(allbasedintheeuroarea),fivefromtheUS,threefromJapan,twofromtheUK,twofromCanadaandonefromSwitzerland.

17Suchentity-specificrequirementsmayforcebankstomaintainmorecapitalthanwouldbenecessaryifonlygroup-levelcapitalrequirementsapplied;thedifferenceissometimesreferredtoas“trappedcapital”(Enria2021).

PB26-13|AUGUST202610

mostotherjurisdictionsdo.Whilethissituationmaynotbeoptimal,weviewitasunlikelytochangesignificantlyinthenearfuture.18

Recommendationsoncompletingthebankingunion,formulatedinVéron(2024),arenotrepeatedhere.AsfortheissueoftweakingthemandatesoftheEBA,ECBand/orSRBtomakethemmore

competitiveness-friendly,theargumentsinfavorarenotcompelling.TheECB,initsbankingsupervisorycapacity,isapuresupervisor

withnorulemakingauthority,19theEBA’sroleinrulemakingis

essentiallyadvisory,20andtheSRBsimilarlyisnotastand-alonerulemaker.BalancingthepotentiallycompetingconsiderationsofsystemicriskandcompetitivenessinvolvedintheregulatoryprocessisultimatelyataskfortheEuropeanCommissionand

EUcolegislators(theEuropeanParliamentandCouncil),which

alreadyhavetheappropriatemandates.Advocatesofchanging

themandatesgenerallytakeinspirationfromUSpracticeand/or

fromrecentreformsoftheUnitedKingdom’sPrudentialRegulationAuthority.ButthelatterhasbeengrantedindependentrulemakingauthorityonlysinceBrexit,andUSfederalauthoritieshavehad

suchauthorityforalongtimeunderCongressionalscrutiny.ThesereferencesarethusunsuitedtotheEUcontext,whereregulationandsupervisionareentrustedtoseparateentities.

18OntailoringintheEUandUS,see,e.g.,LehmannandVéron(2021).Oneoftheauthors(Véron)hasongoingresearchonsmallerEU

banksthatmaybepublishedlaterin2026.

19TheECBoccasionallypublishesguidance,generallyinresponsetorequestsfromsupervisedbanks,butsuchguidancehasnobindingcharacter.AlltheSSM’slegallybindingdecisionsaremadeatthe

levelofindividualsupervisedentities.Longstandingexperience

suggeststhatgivingbankingsupervisorsobjectivesotherthanbanksafetyandsoundnessislikelytobedetrimentaltofinancialstability.

20Similarly,theEBApublishesopinionsandrecommendationsof

itsown,butthesearenotlegallybinding.Itsmaininputintothe

regulatoryprocessistodrafttechnicalstandardsforconsiderationbytheEuropeanCommission,thelatterbeingthedecision-makingauthorityfortheireventualadoption.Article1(5)oftheEBA

Regulation(EU1093/2010)states:“TheobjectiveoftheAuthorityshallbetoprotectthepublicinterestbycontributingtotheshort,mediumandlong-termstabilityandeffectivenessofthefinancialsystem,fortheUnioneconomy,itscitizensandbusinesses,”

PB26-13|AUGUST202611

Asalsomentionedabove,ourchoiceoffocusleavesaside

considerationsaboutthebankresolvabilityframework,whichhasbecomeasignificantdriverofregulatorycomplexityforEUbanks.Ultimately,theseconcernsarebestaddressedwithinabroader

effortofcompletingthebankingunion.Theyalsohavelessdirectimpactontheeconomicsofbankingbusinessthanthecapital

frameworkthatisourfocushere,andforthatreasonarenotraisedasintenselybybanking-sectoradvocates.

2.CAPITALREQUIREMENTSONMEGABANKSINTHEEUANDUSUPTO2025

Thissectionaimsataholistictransatlanticcomparison,with

awarenessthatlike-for-likebenchmarkingisextremelydifficult

inpracticebecauseofdifferentpoliticaleconomies,institutional

legaciesandevensemantics.Thesummarizeddescriptionofthe

mainBaselFrameworkconceptsinthe

appendix

introducesthetwokeyratios,referredtohereafterrespectivelyasthesolvencyratio

(CommonEquityTier-1capitaloverrisk-weightedassets)andtheleverageratio(Tier-1capitalovernon-risk-weightedassets).21

2.1EUandUScompliancewiththeBaselFrameworkuntil2025

TheoriginalBaselIaccord(1988),developedpartlybecauseofUSconcernsaboutcompetitionfromJapanesebanks,calibratedaminimumsolvencyratioat4percentforTier-1(T1)capitaland8percentforallcapital(alsoincludingTier-2,orT2).22Thenext

21Thereferencetotheratioofcapitaltorisk-weightedassetsasthe

“solvencyratio,”whilefarfromuniversallyadopted,hasprecedentinBaselCommitteeusage:e.g.BCBS(2014,p.21,graph15).

22Thehistoryofcapitalrequirements,ofcourse,didnotstartwith

BaselI.Earlyformswereobservedasfarbackasfifteenth-centuryVenice(Ugolini2017,p.124),andrisk-weightedcapitalratioshad

beeninplaceearlierinseveralcontinentalEuropeancountries

(Tarullo2008,p.41;Goodhart2011,p.146).IntheUS,earlycapitalrequirementsusedadifferentapproachofcomparingcapitalwithdeposits.USattemptsat“modern”capitalrequirementsstartedinthelate1930sbutonlycametofruitionintheearly1980switha

minimum5-percentleverageratioonalldeposit-takinginstitutions(Haubrich2020).

PB26-13|AUGUST202612

iterationorBaselII(2004)introducedgreaterflexibilityinrisk-

weightingcalculations,byallowingbankstouseinternalmodels

asanalternativetotheso-calledstandardizedapproachofBaselI.Startinginmid-2007,thegreatfinan