March 29, 2019

EBA published the risk dashboard for the fourth quarter of 2018. The dashboard summarizes the main risks and vulnerabilities in the EU banking sector based on data as of the end of 2018 data. In comparison with 2017, the dashboard reveals improved asset quality and stable capital ratios, though bank profitability is still below the long-term sustainable levels.

The dashboard presents the following key results:

  • Capital ratios of European banks remained high, with a slight decrease when compared to 2017. The common equity tier 1, or CET1, (transitional) ratio was 14.6% in December 2018, showing a slight decrease from 14.9% in 2017. The decrease is driven by an increase in the total risk exposure amount. CET1 ratios remained above 11% for all countries in the sample. The fully loaded CET1 ratio also showed a decrease and stood at 14.4% compared to 14.6% in 2017.
  • The quality of loan portfolio of EU banks continued to improve. In 2018, the ratio of non-performing loans (NPLs) to total loans kept the downward trend and reached a value of 3.2%, showing its lowest level, since the NPL definition was harmonized across the EU/European Economic Area. The NPL decline is attributed both to the upward trend of total loans granted and to the steady decline in the amount of NPLs (EUR 658 billion in the fourth quarter of 2018). However, dispersion across EU/European Economic Area countries remained high and economic slowdown could make further improvements harder to achieve. The coverage ratio of NPLs and advances was 45.1% in the fourth quarter of 2018, compared to 44.6% in the fourth quarter of 2017.
  • In terms of liquidity risk, the leverage ratio remained stable and the liquidity coverage ratio continued its upward trend reaching 152%. The leverage ratio (fully phased-in) in the fourth quarter of 2018 stood at 5.3%, representing a marginal decrease from 5.4% in the fourth quarter of 2017. Furthermore, the asset encumbrance ratio remained stable compared to 2017. 


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Keywords: Europe, EU, Banking, Risk Dashboard, NPLs, CET 1, Leverage Ratio, LCR, Liquidity Ratio, EBA

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