Banking sector regulatory capital - 2022 Q3

Key points

• The Common Equity Tier 1 (CET1) capital ratio for the UK banking sector increased slightly by 0.1 percentage points on the quarter to 15.6%.
• The level of CET1 capital increased by 4.7% on the quarter, from £468bn to £490bn.
• There was a 4.1% increase in total risk-weighted assets on the quarter, from £3,010bn to £3,132bn.  

Table A: Capital ratios and levels of capital and risk-weighted assets in the UK banking sector ^(a)

Chart 1: Capital ratios for the UK banking sector

Chart 2: Contributions to quarterly change in total capital ratio ^{(a) (b)}

Table B: Risk-weighted assets by risk type (£ billions) ^(a)

Chart 3: Changes in risk-weighted assets by risk type

Comparison of published capital ratios for the UK and the EU

Capital ratios for the UK banking sector are published by a number of organisations; the Bank of England (BoE), the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Banking Authority (EBA). These ratios are not identical due to differences in firm coverage, use of transitional or endpoint capital, method of averaging and data revisions as explained below. Chart 4 shows a comparison of published capital ratios for the UK in the panel on the left with EU average ratios published by the EBA in the panel on the right. Table C provides descriptions of the underlying datasets and provides links to their definitions.

Chart 4: Comparison of published capital ratios for the UK and the EU

The effects of the differences in datasets and methodologies can be generalised as follows:

• Firm coverage – the BoE, the ECB and the IMF publish capital ratios that represent averages of the total UK banking sector. While they all use the same data, the ECB and IMF publications are less timely and may include minor differences when compared with BoE data due to revisions. EBA aggregate statistical data exclude designated investment firms that are subsidiaries of banks headquartered outside the UK. The Financial Policy Committee’s (FPC) indicators^{footnote [1]} cover major UK banks^{footnote [2]} only, rather than the total UK banking sector, and this generally has a downward effect on the ratio. The EBA publish tables showing average capital ratios for a sample of EU banks, including UK banks, which have been included in Chart 4 for comparison. While they also publish charts showing UK ratios, the data behind these charts are not currently available for publication in this release.
• Averaging method – the EBA Risk Dashboard presents key risk indicators as percentiles (medians shown in Table C) rather than as weighted means, which will tend to have an upward effect.
• Use of transitional or endpoint capital^{footnote [3]} – the use of endpoint capital will tend to have a slight downward effect on ratios, compared to those using transitional capital.
• Timing – both timeliness and frequency vary across datasets. The banking sector regulatory capital statistical release and FPC indicators are the timeliest. The EBA aggregate statistical data are published annually while all other datasets are published quarterly.

Table C: Description of different published capital ratios for the UK

(a) From Q1 2020, following the UK’s departure from the EU on 31 January 2020 (i.e. the beginning of the transition period), ECB ceased publication of consolidated banking data for the United Kingdom.

(b) From 2018, Basel III Tier 1 capital ratios reflect IFRS 9 transitional arrangements as agreed in European law.

(c) Prior to the reporting period Q1 2020 the EU aggregates included the sample of UK banks (see EBA Risk Dashboard) in the time series. Following the UK’s departure from the EU on 31 January 2020 (i.e. the beginning of the transition period), for the reporting periods Q1 2020 to Q4 2020 the risk indicators for the sample of UK banks were excluded from the EU aggregates, but where appropriate the aggregated UK risk indicators were reported separately. From 1 January 2021, after the end of the transition period on 31 December 2020, the EBA risk dashboard ceased to include such data for UK banks.

Next release – 31 March 2023