ECB lowers bank capital requirements, supporting shareholder payouts

Investing.com -- The European Central Bank has reduced the amount of capital banks need to hold, which will support their ability to make shareholder payouts after they successfully passed a financial health check earlier this year.

Banks will see their minimum requirement for common equity Tier 1 capital decrease to 11.2% of risk-weighted assets in 2026, down from 11.3% in 2025, the ECB announced Tuesday in Frankfurt.

The banking industry currently exceeds this requirement by a significant margin, with a weighted average CET1 ratio of 16.1% as of June.

Following these strong results, the ECB also reduced the non-binding Pillar 2 Guidance, a capital buffer that banks are asked to maintain. This buffer will decrease to 1.1% of risk-weighted assets in 2026 from 1.3% in 2025.

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