Global banks’ capital high, crypto exposures low

As global banking regulators craft capital rules for banks’ crypto exposures, new data from the Basel Committee on Banking Supervisors finds that those holdings are currently minimal.

In a new report, the Basel Committee introduced a novel dataset that examined crypto exposures for 19 banks, including 10 from the Americas region, seven from Europe, and two from the rest of the world.

It found that banks reviewed held approximately €9.4 billion in cryptoassets, representing just 0.14% of their total exposures, and just 0.01% of total exposures for all global banks.

Additionally, it noted that two of the banks that contributed data accounted for over half of total crypto exposures.

The vast majority of these exposures were to Bitcoin and Ether, with 56% of total holdings in Bitcoin (or Bitcoin-based instruments), and 32% in Ether and Ether-based products.

The results of the regulators’ crypto survey were reported as part of their latest review of banks’ implementation of the latest capital rules, known as Basel III.

That review found that, as of Dec. 31, 2021, Basel III capital ratios were at the highest level on record, as capital growth outpaced the growth in banks’ risk-weighted assets.

As a result, total capital shortfalls from the fully-phased in capital rules was down to just €100 million from €2.3 billion in mid-2021.

“Dividend distribution constraints during the Covid-19 period in several jurisdictions may have contributed to the decrease of the shortfall as well as temporary capital buffer relief measures,” the report noted.

Alongside the strong capital levels, the report also found that the banks’ average liquidity coverage ratio remained high at 141.3%, and the average net stable funding ratio increased from 124.5% to 125.1%.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.