Featured Product

    EBA Publishes Risk Dashboard for Third Quarter of 2019

    January 08, 2020

    EBA published the risk dashboard for the third quarter of 2019 and the results of the semi-annual Risk Assessment Questionnaire for Autumn 2019. The dashboard summarizes the key risks and vulnerabilities in the EU banking sector. EBA also published the results of its Risk Assessment Questionnaire. The risk dashboard shows that the capital ratios of banks in EU have remained stable for the third consecutive quarter and the asset quality of banks continued to improve, while analysts expect increased issuance of bail in-able debt.

    The risk dashboard is based on a sample of 147 banks, covering more than 80% of the banking sector (by total assets) in EU, at the highest level of consolidation. The following are the key results of the risk assessment:

    • The capital ratios of banks in EU remained stable for the third quarter in a row. The common equity tier 1 ratio remained at 14.4% on a fully loaded basis, with the increase in capital compensated by a parallel expansion of risk exposure amounts. 
    • Asset quality kept on improving, though at a slower pace. The ratio of nonperforming loans also declined from 3.0% to 2.9%. Looking forward, the percentage of banks expecting a deterioration in asset quality further increased, particularly for lending to small and medium enterprises (SME) and commercial real estate financing. Notwithstanding this outlook, banks still plan to increase their SME financing as well as consumer lending.
    • On the liability side, banks mainly intend to attain more bail in-able instruments (senior non-preferred and Holding Company bonds) as well as retail deposits. Analysts also expect increased issuance of bail in-able debt. However, contrary to banks, the percentage of analysts expecting more preferred senior unsecured funding strongly increased. Positive expectations about the placement of minimum requirement for own funds and Eligible Liabilities (MREL) instruments come in parallel to decreasing concerns about the issuance of MREL-eligible instruments. The banks pointing to pricing and uncertainty on required MREL amount as constraints for MREL-eligible issuance fell to 50% and 30%, respectively.

    The results of the Risk Assessment Questionnaire cover bank and market analyst expectations on future trends and developments, with 65 banks and 13 market analysts submitting their answers. The results of the Risk Assessment Questionnaire survey indicate that, in response to a bleak outlook for bank profitability, banks are targeting operating expenses and fee and commission income. On a positive note, the low interest rate environment reduced concerns about pricing obstacles to MREL issuance. Similarly, the recent approval of the Banking Package seems to have reduced the percentage of banks citing regulatory uncertainty about MREL requirements as a concern. However, banks and analysts appear increasingly pessimistic about asset quality developments, especially for commercial real estate and SME exposures. Additionally, the percentage of banks and analysts expecting an increase in operational risk remained roughly unchanged (55% in both cases). Banks point to cyber risk and data security as the key drivers of operational risk while analysts identify money laundering and terrorist financing risks as well as conduct and legal risks as the main drivers of operational risk. 

     

    Related Links

    Keywords: Europe, EU, Banking, Risk Dashboard, Risk Assessment Questionnaire, CET 1, Basel III, NPLs, Credit Risk, MREL, Operational Risk, EBA

    Featured Experts
    Related Articles
    News

    APRA Updates Validation and Derivation Rules in September 2020

    APRA updated the lists of the Direct to APRA (D2A) validation and derivation rules for authorized deposit-taking institutions, insurers, and superannuation entities.

    September 24, 2020 WebPage Regulatory News
    News

    EC Proposes Frameworks for Crypto-Assets and Operational Resilience

    EC adopted a package that includes the digital finance and retail payments strategies and the legislative proposals for regulatory frameworks on crypto-assets and digital operational resilience.

    September 24, 2020 WebPage Regulatory News
    News

    ECB Publishes Opinion on Proposals to Amend Securitization Framework

    ECB published an opinion (CON/2020/22) on proposals for regulations amending the securitization framework of EU, in response to the COVID-19 pandemic.

    September 24, 2020 WebPage Regulatory News
    News

    FCA Consults on Regulation of International Firms in UK

    FCA is consulting on its approach to the authorization and supervision of international firms operating in UK.

    September 23, 2020 WebPage Regulatory News
    News

    MAS Amends Notice on Capital Adequacy Requirements of Banks

    MAS published amendments to Notice 637 on the risk-based capital adequacy requirements for reporting banks incorporated in Singapore.

    September 23, 2020 WebPage Regulatory News
    News

    FCA to Begin to Move Firms to New Data Collection Platform RegData

    FCA announced that it will move firms to RegData from Gabriel in the coming months in stages, based on the reporting requirements of firms.

    September 23, 2020 WebPage Regulatory News
    News

    ISDA Expects IBOR Fallbacks to be Effective by End of January 2021

    ISDA issued a letter to regulators to flag that it now expects the supplement to the 2006 ISDA Definitions and the Interbank Offered Rate (IBOR) Fallbacks Protocol to be effective around mid- to late-January 2021.

    September 23, 2020 WebPage Regulatory News
    News

    APRA Reviews Repayment Deferral Plans, Identifies Best Practices

    APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.

    September 22, 2020 WebPage Regulatory News
    News

    ESAs Assess Risks to Financial Sector After COVID-19 Outbreak

    ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.

    September 22, 2020 WebPage Regulatory News
    News

    BoE Confirms Withdrawal of COVID Corporate Financing Facility

    BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.

    September 22, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5836