EBA Updates Risk Dashboard for the Second Quarter of 2019
EBA published risk dashboard for the second quarter of 2019. The risk dashboard summarizes the main risks and vulnerabilities in the EU banking sector. In the second quarter of 2019, the capital ratios have remained broadly stable and banks' asset quality has further improved. However, low profitability continues to be a key challenge for the banking sector.
The dashboard is based on a sample of 150 banks that cover more than 80% of the banking sector in EU. The following are the key highlights of the risk dashboard:
- Capital ratios of EU banks have remained broadly stable since the third quarter of 2018. Fully loaded Common Equity Tier 1 (CET 1) ratios remained at 14.4%, in line the previous quarters. The CET1 ratio on a transitional basis was 14.6%, 10bps below Q1, mainly as a result of the one-off changes in the reporting sample. While the average capital ratios remained broadly unchanged, banks on the lower end of the distribution further increased the capital ratios.
- The improvement in asset quality continued, but at slower pace. The ratio of nonperforming loans (NPLs) further declined to 3.0% from 3.1% in the previous quarter. However, while the first quarter decrease of the NPL ratio was mainly supported by an increase in total loans, the contraction in the second quarter was driven by declining NPLs. Around 40% of the sovereign exposures of banks have a maturity of more than five years while 42% of the sovereign exposures are toward the banks' home countries and 28% toward other EU/European Economic Area countries.
- No major changes took place to funding and liquidity related risk indicators of EU banks. The loan-to deposit ratio for households and non-financial corporations continued its constantly decreasing trend to 116.4%. The liquidity coverage ratio declined from 152.6% in the previous quarter to 149.2%, stopping its rising trend of the previous quarters.
Looking forward, rising economic and political uncertainty might negatively affect the EU banking sector. The challenge of low profitability might aggravate amid potentially increasing impairments and provisioning needs. Also, new lending volumes might suffer from a worsening in the general economic conditions and from a deterioration of the asset quality.
Related Links
- Press Release
- Risk Dashboard (PDF)
- Risk Dashboard Interactive Tool (XLSX)
- Risk Dashboard Annex (PDF)
Keywords: Europe, EU, Banking, Risk Dashboard, Liquidity Risk, CET 1, Basel III, NPL, Credit Risk, LCR, EBA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
EBA Single Rulebook Q&A: First Update for October 2019Related Articles
EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB Begins First Phase of Post-Implementation Review of IFRS 9
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB Report Examines Progress in Resolvability of Systemic Institutions
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA Benchmarks National Insolvency Frameworks Across EU
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB Reports Assess Impact of Pandemic on Financial Stability
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ Consults on Implementation of Capital Review Changes
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
IASB Announces Andreas Barckow as the New Chair from July 2021
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA Consults on Capital Rules for Bank Equity Investments in Funds
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB Supports Extension of Macro-Prudential Measure by Swedish FSA
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).
