September 19, 2018

EBA published two reports examining the funding plans and asset encumbrance of banks in EU. For this assessment, 159 banks submitted their plans for funding over a forecast period of three years (2018 to 2020). The results of the assessment show that banks plan to match the asset side increase in the forecast years by a growth in client deposits as well as market-based funding.

The report on funding plans reveals that total assets are projected to grow, on average, by 6.2% by 2020. The main drivers for asset growth are loans to households and to non-financial corporates. Banks expect to increase client deposits and long-term debt funding while short-term debt and repo funding are expected to fall. The projected data shows a concentration of debt securities issuance in 2019 and 2020. Data also show that the spread between interest rates for client deposits and for loans to clients declined in 2017 and most banks expect the spread to decline even further in 2018. On the cost of funding, banks seem optimistic as they assume their costs of long-term market-based funding in 2018 will remain at 2017 levels. The report suggests that the evolution of banks' interest spread and market-based funding costs should be closely monitored, particularly for banks that are under pressure to increase profitability or without access to market-based funding at reasonable rates.

The report on asset encumbrance shows that in December 2017 the overall weighted average asset encumbrance ratio stood at 27.9%, compared to 26.6% in 2016. The modest increase of the encumbrance ratio is not an issue of immediate concern in the funding structure of EU banks. Additionally, repos, covered bonds, and over-the-counter derivatives are among the main source of asset encumbrance. Banks in countries that were more affected by the sovereign debt crisis still have high levels but have shown a decrease in the volume of encumbrance, which could reflect a general improvement in the funding situation in these countries. These reports aim to provide important information for EU supervisors to assess the sustainability of banks' main sources of funding of banks.

Related Links

 

Keywords: Europe, EU, Banking, Asset Encumbrance, Funding Plans, EBA

Related Articles
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
News

OCC Consults on Information Collection for Home Mortgage Disclosures

OCC is soliciting comment on the revision of the information collection titled “Regulation C—Home Mortgage Disclosure.” OCC also notes that it has sent the collection to OMB for review.

May 20, 2019 WebPage Regulatory News
News

EIOPA Updates Q&A on Regulations in May 2019

EIOPA published additional questions and answers (Q&A) on guidelines, directives, and regulations applicable to insurers in Europe.

May 17, 2019 WebPage Regulatory News
News

FSB Publishes Update on Meeting of RCG for Americas

FSB published a summary of the meeting of its Regional Consultative Group (RCG) in Americas.

May 17, 2019 WebPage Regulatory News
News

IASB Issues Work Plan and Meeting Updates for May 2019

IASB published an updated work plan, along with the update of its meeting in May 2019.

May 17, 2019 WebPage Regulatory News
News

FCA Publishes Its Business Plan for the Coming Year

FCA published its Business Plan, which sets out the main areas of focus and priorities for 2019/20.

May 17, 2019 WebPage Regulatory News
News

CFTC Proposes to Amend Derivatives Clearing Organization Regulations

CFTC proposed amendments to certain regulations applicable to registered derivatives clearing organizations (DCOs) under Part 30 of the CFTC regulations.

May 16, 2019 WebPage Regulatory News
News

APRA Licenses Societe Generale As Foreign Deposit-Taking Institution

APRA granted Societe Generale a license to operate as a foreign authorized deposit-taking institution under the Banking Act of 1959.

May 16, 2019 WebPage Regulatory News
News

EBA Provides Updates on Its Work on Basel III Impact Assessment in EU

EBA is working to finalize the impact assessment on implementation of Basel III standards, in response to the EC call for advice, which was received on May 04, 2018.

May 16, 2019 WebPage Regulatory News
News

ISDA Publishes Two Consultations on Benchmark Fallbacks

ISDA published two consultations on benchmark fallbacks, the comment periods for which expire on July 12, 2019.

May 16, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3097