This report collates information on European GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 30 September 2021.

It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe as at November 2021.

Among the main findings of this report:

• CET1 and T1 capital ratios increased in Q3 2021: European GSIBs end-point CET1 ratio increased from 14.36% in 2Q21, to 14.51% in 3Q21.

Earnings retention contributed 27 bps to the 15bps increase in CET1 during the quarter, which was offset by RWA growth, FX variations, and other bank-specific factors.

All the banks covered in this report have launched during the year or are expected to launch buyback programs which contribute to reduce capital buffers formation albeit from the existing record-high CET1 ratios. Of the banks that undertook buyback programmes during 3Q21, this represented between 10bps and 20bps on CET1 ratio.

• Banks have continued to increase credit risk RWAs on an absolute and relative basis. The increase in credit risks is predominantly driven by business growth and improving economic forecasts.

Credit quality has not been a major driver to credit risk RWAs growth as stage 3 exposures have declined 2% YtD (EUR 4bn) while impairment allowances have declined 4.3% YtD (EUR6.2bn)

• Contingent Convertible (CoCo) borrowing costs increase from record lows: Coupon rates of newly originated AT1s rose to 5.1% in 4Q’21, an increase from an average of 4.2% observed in 3Q’21. The increase in borrowing costs was driven by higher risk premia and likely due to rising inflation expectations in the UK and the euro area.

European banks have issued a total of EUR 29bn in AT1 CoCos as of November 2021, of which EUR 16.5bn were issued by European GSIBs.

• Basel implementation in the EU and UK: The Box on pages 22-26 discusses the EU and UK implementation of the final December 2017 Basel III standards.

In the EU, on 27 October, the European Commission published the anticipated CRR3 proposal which implements the final elements of the Basel III package. According to the EU Commission’s proposal, the majority of measures are expected to be implemented on 1 January 2025.  The Commission’s text includes a number of transitional arrangements, in particular related to the output floor until 2030 and in some cases extend to 2032.

In the UK, the Prudential Regulatory Authority is expected to consult on the Basel 3.1 implementation during the second half of 2022. For UK authorities, there is a desire to ensure rules, particularly on global business lines, are implemented on a consistent timeline internationally.