Featured Product

    EBA Publishes Report on Risks and Vulnerabilities in EU Banking Sector

    November 29, 2019

    EBA published its annual report on risks and vulnerabilities in the EU banking sector. The report is accompanied by the publication of the 2019 EU-wide transparency exercise, which provides detailed information, in a comparable and accessible format, for 131 banks across the EU. This report describes the main developments and trends in the EU banking sector since the end of 2018 and provides EBA outlook on the main risks and vulnerabilities. Overall, EU banks’ solvency ratios remained stable, while the NPL ratio further contracted.

    The report shows that asset quality has continued to improve, although at a slower pace. The non-performing loan (NPL) ratio declined from 3.6% in June 2018 to 3% in 2019. However, the focus on riskier exposures over the past few years combined with a weakening macroeconomic outlook might change this trend. Banks should take advantage of the current low interest rate environment to build up their minimum requirement for own funds and eligible liabilities (MREL) buffers. With an increasing number of banks charging or planning to charge negative interest rates to corporate and household deposits, the effects of such measures on the deposit base remain to be seen.

    After material progress over the past few years, capital ratios remained broadly unchanged year on year (YoY). As of June 2019, the common equity tier 1 (CET1) ratio stood at 14.4% (14.3% in June 2018) on a fully loaded basis. A parallel increase in risk-weighted assets (RWAs) (2.5% YoY) and CET1 (3% YoY) was observed in the last year. Credit risk, which makes up 80% of total RWA, has increased by roughly 2.5%, which is lower than the growth in total assets (3%) and total loans (3.5%). Such developments indicate that credit RWAs are driven not only by trends in banks’ assets, but also by changes in the composition of banks’ exposures and risk parameters. Assets of EU banks rose by 3% between June 2018 and June 2019. Since 2014, commercial real estate, small and medium-sized enterprise, and consumer credit exposures have been the segments with the highest growth rates. 

    The report highlights that the deteriorating macroeconomic environment along with low interest rates and intense competition from banks and from financial technology (fintech) firms and other financial players is expected to add further pressure to bank profitability. In this challenging environment, the streamlining of operating expenses is presumably the main area to improve profitability. Technology risks and increasing money laundering and terrorist financing cases are some of the key drivers for constantly elevated operational risk while cyber-attacks and data breaches represent major concerns for banks.

     

    Related Links

    Keywords: Europe, EU, Banking, Transparency Exercise, Risk Assessment Report, Risks and Vulnerabilities, MREL, Credit Risk, Operational Risk, EBA

    Related Articles
    News

    NGFS Seeks Public Feedback on Climate Risk Assessment Scenarios

    The Network for Greening the Financial System (NGFS) launched its first user feedback survey on climate scenarios, with the feedback period ending on February 27, 2023.

    February 06, 2023 WebPage Regulatory News
    News

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8702