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Supervisory measures in reaction to the Corona crisis – Minimum capital ratios

Minimum capital ratios

The following blog post is part of the overview of supervisory measures in reaction to the Corona crisis:Supervisory measures in reaction to the Corona crisis – Overview.

According to the ad hoc measures taken by the ECB, banks can fully use their capital buffers during this time of financial distress, including the Capital Conservation Buffer (CCB) and the Pillar 2 Guidance (P2G). This means that banks are allowed to operate temporarily – until further notice – below the level of capital defined by the P2G and the CCB. 

Besides, banks can partially use capital instruments that do not qualify as CET1 capital, e.g. Additional Tier 1 or Tier 2 instruments, to meet their Pillar 2 Requirement (P2R). This measure is effectively an early implementation of the standards laid down in CRD V that originally should entry into force in January 2021). Banks will therefore benefit from relief in the composition of capital for the P2R.