EU Banking Sector

EBA Publishes Risk Dashboard of EU Banking Sector for Q1 2015

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On June 4, 2015, the European Banking Authority (EBA) published its risk dashboard for the first quarter of 2015, summarizing the main risks and vulnerabilities in the banking sector, together with a press release.

The risk dashboard is based on data from the fourth quarter of 2014 and takes into consideration the evolution of a set of key risk indicators from 55 EU banks. It confirms, among other things, that:

  1. EU banks’ capital positions remained strong, with a common equity tier 1 (CET1) ratio of 12.1%. This is an increase of 50 basis points compared to 2013.
  2. The quality of banks’ loan portfolios remained weak but bottoming out.
  3. Profitability showed a mildly positive trend on a year over year comparison, but return on equity remained subdued and materially below banks’ average cost of equity.
  4. In 2014, at an EU level, deposits increased more than loans. The EU average loan‐to‐deposit ratio therefore decreased further in Q4 2014 to 108.6%, which is the lowest ratio since 2009.

The EBA risk dashboard is part of the regular risk assessment carried out by the EBA and complements the EBA’s risk assessment report.

EBA Publishes Risk Dashboard of EU Banking Sector for Q3 2014

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On December 11, the European Banking Authority (“EBA“) published its risk dashboard for the third quarter of 2014, summarizing the main risks and vulnerabilities in the EU banking sector.

The data reflected in this version of the dashboard shows that, among other things:

  • Capital positions in EU banks reached the highest level since 2009, driven by capital issuances ahead of the stress test and assets quality review exercises;
  • Levels of non-performing loans remained stable, but were still high;
  • Profitability levels were volatile;
  • Shifting of balance sheet structure continued; and
  • Loan-to-deposit ration remained fairly unchanged during H1 2014.

 The EBA also published an interactive tool.

EBA Publishes First Risk Dashboard of EU Banking Sector

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On October 29, the European Banking Authority (EBA) published its first risk dashboard, summarizing the main risks and vulnerabilities in the EU banking sector.

It is based on data from the second quarter of 2013 and takes into consideration the evolution of a set of key risk indicators from 56 EU banks that the EBA has been collecting, on a quarterly basis, since 2009.

The accompanying press release states that after the past two years of repair, the overall conditions of EU banks have improved.  In particular, data in the EBA dashboard illustrates that capital positions have been significantly strengthened and that funding conditions have recovered.  Risk Dashboard.  Press Release.

Liikanen Report: Structural Reforms of the EU Banking Sector

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On October 2, the European Commission published the final report on reforming the structure of the EU banking sector by the high-level expert group chaired by Erkki Liikanen.  The group was established by the Commission in February 2012 in order to assess whether additional reform targeting the structure of individual banks would reduce potential failures and better protect retail clients.

The final report recommends the following steps, which the Commission will consider in light of its proposed legislative reforms:

  • o    Changing banks’ capital requirements, particularly in the areas of trading assets and loans relating to real estate;
  • o    Mandatorily separating proprietary trading from other significant trading activities, ensuring that they are legally separate from a deposit bank;
  • o    Permitting supervisors to require the further separation of activities to aid resolvability;
  • o    Reforming governance and remuneration arrangements; and
  • o    Amending certain of the bail in proposals contained in the proposal for the Resolution and Recovery Directive of June 2012.