An Overview of Spanish Banks’ 2019 SREP Requirements
DBRS views major Spanish banks’ capital cushion over their 2019 regulatory requirements as adequate, with an average CET1 cushion of 300 bps over their requirements on a phased-in basis or 212bps on a fully-loaded basis. Capital requirements increased on average by 82 bps for 2019, but DBRS considers that this rise does not reflect a deterioration of the risk profile of the banks but is driven by the calendar effect of regulatory buffers.For more information about capital requirements, please see: A Quick Guide to 2018 European Bank Capital Requirements - TSCR, OCR, TCD, MDA
Pillar 1 Requirement (P1R): Unchanged since this is a statutory requirement that all Banks must always comply with.
Pillar 2 Requirement (P2R): Average increase of 12 bps. DBRS considers that this increment is not significant, and not fully related to a deterioration in the risk profile of the banks. Four banks reported higher P2R, ranging from 25 bps to 50 bps. The reasons behind the increases are mainly due to (1) the harmonisation exercise of P2R across countries or (2) higher operational risks related to IT issues.
Systemic Buffer (SB): Average increase of 5 bps. Five Banks in Spain had higher SB, ranging from 6 bps to 25 bps. This buffer has been built up on a gradual phase-in transition, reaching its current final level in 2019. Currently, only five Spanish Banks are considered systemic.
Capital Conservation Buffer (CCoB): Average increase of 63 bps. The requirement increased by the same amount for all Spanish banks. The buffer was also being built up on a gradual phase-in transition, reaching its current final level.
Counter Cyclical Buffer (CCyB): Average increase of 3 bps. Three Spanish banks reported higher CCyB, from 1 bp to 17 bps. Competent authorities usually update the CCyB quarterly. The increase affected mainly banks with exposures to the United Kingdom (UK), as its national authority set a CCyB rate at 1% of RWAs binding from November 2018.
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