Coverage: weekly note · Information to 28 November 2025
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TGB Weekly Research Note · 28 November 2025
Supervisory data for mid-2025 put every banking system reviewed here above the 7.0% Basel III CET1 floor including the conservation buffer, but aggregate ratios span roughly 9 percentage points and Europe's lead in risk-based capital reverses on leverage.
The desk view
EU/EEA banks reported a CET1 ratio of 16.3% in Q2 2025, the UK banking sector 15.4% and FDIC-insured US institutions 14.19%, all well above the 7.0% Basel minimum including the conservation buffer. The distribution is uneven, however: Hong Kong's locally incorporated banks reported 19.9%, while Chinese commercial banks' core tier-1 ratio was 10.93%. The Basel Committee finds Tier 1 ratios higher in Europe than in the Americas and the rest of the world, yet at end-2024 European leverage ratios were the lowest of the three regions, at 5.1%. Our reading is that headline headroom over the Basel floor overstates usable capital wherever national requirements, leverage constraints or the final Basel III phase-in bite.
Every system reviewed clears the Basel floor
Basel III sets a minimum CET1 ratio of 4.5% and a capital conservation buffer of 2.5%, a combined 7.0%, and global systemically important banks (G-SIBs) carry a surcharge of 1.0-2.5% that lifts their CET1 target to 8.0-9.5%. The Basel Committee's latest global benchmark covers end-2024 data: the average CET1 ratio of large internationally active (Group 1) banks rose from 13.4% to 14.0% over the second half of 2024.
Supervisory data for mid-2025 show the same picture at system level. EU/EEA banks reported a CET1 ratio of 16.3% in Q2 2025, ECB-supervised significant institutions 16.12% and the UK banking sector 15.4%. For FDIC-insured US institutions the ratio was 14.19% in the first half of 2025, a figure that excludes banks electing the community bank leverage ratio. In Asia, Hong Kong's locally incorporated banks reported 19.9% at end-June 2025 and Singapore's domestic systemically important banks (D-SIBs) 16.3% in Q2 2025, while Chinese commercial banks reported a core tier-1 capital adequacy ratio of 10.93%. Each of these aggregates is above the 7.0% Basel combination of minimum and conservation buffer.
A spread of 9 percentage points between systems
Between Hong Kong and China the gap in reported ratios is roughly 9 percentage points. Against the 7.0% Basel benchmark, Chinese commercial banks hold 3.93 percentage points of headroom and Hong Kong's banks 12.9 percentage points. Samples differ, so the comparison is approximate: the US figure covers FDIC-insured institutions without community bank leverage ratio electors, and the Indian figure, 14.6%, covers 46 select banks in March 2025.
National requirements also sit above the Basel floor in several systems. India's prescribed CET1 minimum is 5.5%, Singapore's is 6.5% and rises to 9.0% with the conservation buffer, and ECB-supervised banks face an overall CET1 requirement and guidance of 11.2% applicable in 2026. Measured against those domestic bars, the 16.1% average for ECB-supervised banks leaves about 4.9 percentage points and Singapore's D-SIBs 7.3 percentage points.
CET1 ratios by banking system, mid-2025
| Banking system | Measure | Period | Ratio |
|---|---|---|---|
| Hong Kong, locally incorporated banks | CET1 | Q2 2025 | 19.9% |
| EU/EEA banks | CET1 | Q2 2025 | 16.3% |
| Singapore D-SIBs | CET1 | Q2 2025 | 16.3% |
| Euro area significant institutions | CET1 | Q2 2025 | 16.12% |
| United Kingdom | CET1 | Q2 2025 | 15.4% |
| India, 46 select banks | CET1 | March 2025 | 14.6% |
| United States, FDIC-insured | CET1 | Q2 2025 | 14.19% |
| China, commercial banks | Core tier 1 | Q2 2025 | 10.93% |
Source: Hong Kong Monetary Authority, Half-Yearly Monetary and Financial Stability Report, September 2025, Chapter 5, 29 September 2025; European Banking Authority, Q2 2025 supervisory data (press release), 24 September 2025; Monetary Authority of Singapore, Financial Stability Review November 2025, 5 November 2025; European Central Bank (Banking Supervision), Supervisory banking statistics, second quarter 2025 (press release), 17 September 2025; Bank of England, Banking sector regulatory capital - 2025 Q2, 30 September 2025; Reserve Bank of India, Financial Stability Report, June 2025, Chapter II, 30 June 2025; Federal Deposit Insurance Corporation, Quarterly Banking Profile, Q2 2025, 26 August 2025; National Financial Regulatory Administration (China), Supervisory Statistics of the Banking and Insurance Sectors - 2025 Q2, 15 August 2025.
Risk weights and leverage reverse the regional order
The Basel Committee reports that Tier 1 ratios are higher in Europe than in the Americas and the rest of the world, a reversal of the 2011-2014 pattern. On the non-risk-based leverage measure the order flips: at end-2024 Group 1 leverage ratios were 5.1% in Europe, 5.8% in the Americas and 7.1% in the rest of the world. ECB-supervised banks combined a 16.1% CET1 ratio with a leverage ratio of 5.9% in Q2 2025, while Hong Kong's banks paired 19.9% with 7.9%. This suggests that part of Europe's lead in risk-based capital reflects lower average risk weights rather than more equity relative to balance-sheet size.
Across euro area countries, significant institutions' CET1 ratios ranged from 13.18% in Spain to 23.71% in Latvia in Q2 2025, a span of 10.53 percentage points. In the EU/EEA sample the median ratio was 18.2% in June 2025, above the 16.3% weighted average. Globally, G-SIBs averaged 13.8% at end-2024 against 18.0% for Group 2 banks, those below the Group 1 size or international-activity threshold. Both patterns point the same way: the largest balance sheets tend to run the thinnest risk-based ratios.
EU/EEA bank CET1 ratio distribution, June 2025, %
Source: European Banking Authority, EBA Risk Dashboard Q2 2025, 24 September 2025.
Momentum has diverged
The UK sector's CET1 ratio fell from 15.9% in 2024 Q2 to 15.4% in 2025 Q2, while euro area significant institutions rose by 31 basis points over the same year to 16.12%. Hong Kong's ratio climbed from 17.5% in June 2024 to 19.9% in June 2025, and China's core tier-1 ratio rose 0.24 percentage points in Q2 2025 alone. Singapore's D-SIBs moved the other way, easing from 16.6% in Q4 2024 to 16.3% in Q2 2025. Earnings point to further divergence: in the 12 months to December 2024 Group 1 after-tax profits rose 20.4% in the Americas but fell 1.4% in Europe and 16.4% in the rest of the world.
The final Basel III standards add a further layer. On a fully phased-in basis, which applies from 2028, the Basel Committee puts the Group 1 average CET1 ratio at 13.4% rather than 14.0%, with a 1.4% increase in Tier 1 minimum required capital. For bank executives and investors, the relevant question is therefore not whether banks clear the Basel floor, which every system reviewed here does, but how much headroom survives national add-ons, leverage constraints and the 2028 phase-in.
What to watch
- 2026: the overall CET1 requirement and guidance of 11.2% from the 2025 SREP applies to ECB-supervised banks.
- 2028: the final Basel III framework is fully phased in, the basis for the Basel Committee's 13.4% Group 1 CET1 estimate.
Primary sources: Basel Committee on Banking Supervision (BIS), Basel III Monitoring Report, revised November 2025, 23 October 2025; European Banking Authority, Q2 2025 supervisory data (press release), 24 September 2025; National Financial Regulatory Administration (China), Supervisory Statistics of the Banking and Insurance Sectors - 2025 Q2, 15 August 2025; Hong Kong Monetary Authority, Half-Yearly Monetary and Financial Stability Report, September 2025, Chapter 5, 29 September 2025; Bank of England, Banking sector regulatory capital - 2025 Q2, 30 September 2025; Federal Deposit Insurance Corporation, Quarterly Banking Profile, Q2 2025, 26 August 2025; European Central Bank (Banking Supervision), Supervisory banking statistics, second quarter 2025 (press release), 17 September 2025; Monetary Authority of Singapore, Financial Stability Review November 2025, 5 November 2025; Reserve Bank of India, Financial Stability Report, June 2025, Chapter II, 30 June 2025; European Central Bank (Banking Supervision), Aggregated 2025 SREP results (press release), 18 November 2025; European Banking Authority, EBA Risk Dashboard Q2 2025, 24 September 2025.