ECB publishes aggregated statistics on cost of risk and on loans subject to COVID-19-related measures for first time; Aggregate total capital ratio of significant institutions increased to 19.51% in fourth quarter of 2020 (from 19.04% in third quarter and 18.60% one year earlier)
- Aggregate non-performing loans ratio fell further to 2.63%
- Profitability
of significant institutions decreased, with aggregated return on equity
at 1.53% (down from 5.16% one year earlier)
- Liquidity coverage ratio improved further to 171.78%, up significantly from 145.93% one year earlier
Capital adequacy
Following a drop in the first quarter of 2020, the aggregate capital ratios
for significant institutions, (i.e. banks that are supervised directly
by the ECB) increased steadily throughout the remainder of 2020. The
aggregate Common Equity Tier 1 (CET1) ratio stood at 15.62% in the
fourth quarter of 2020, the aggregate tier 1 ratio stood at 16.95%, and
the aggregate total capital ratio stood at 19.51% (up from 14.94%,
16.13% and 18.60% respectively in the fourth quarter of 2019). Aggregate
CET1 ratios at country level ranged from 12.91% in Spain to 29.14% in
Estonia. Across business model categories as applied in the Single
Supervisory Mechanism, global systemically important banks (G-SIBs)
reported the lowest aggregate CET1 ratio (14.46%) and
development/promotional lenders reported the highest (32.09%).
Asset quality
The aggregate non-performing loans (NPL) ratio
fell to 2.63% in the fourth quarter of 2020. The stock of NPLs declined
by 12.4% in one year, falling from €506 billion in the fourth quarter
of 2019 (last reporting date before the outbreak of the pandemic) to
€444 billion in the fourth quarter of 2020. At country level, the
average NPL ratio ranged from 0.78% in Luxembourg to 25.54% in Greece.
Across business model categories, custodians and asset managers reported
the lowest aggregate NPL ratio (0.35%) and diversified lenders reported
the highest (5.74%).
Return on equity
The annualised return on equity
(RoE) stood at an aggregate level of 1.53% in the fourth quarter of
2020 − down from 5.16% a year earlier. This development was driven by a
decrease in aggregate net profits, mainly attributable to a significant
increase in impairments and provisions and a fall in operating income.
Liquidity
The aggregate liquidity coverage ratio
rose continuously in 2020, standing at 171.78% in the fourth quarter of
the year (up from 145.93% in the fourth quarter of 2019). The upward
trend compared with a year previously was driven mainly by a significant
increase in the aggregate liquidity buffer, in particular during the
first three quarters of 2020.
Cost of risk
With this data release, the ECB is publishing statistics on cost of risk
for the first time. Cost of risk is the ratio of the adjustments in
allowances for estimated loan losses during the relevant period
(annualised) divided by the total amount of loans and advances subject
to impairment. The aggregate cost of risk for significant institutions
increased during 2020, reaching 0.67% in the fourth quarter, up from
0.50% a year earlier.
Loans and advances subject to COVID-19-related measures
In
response to the outbreak of the coronavirus (COVID-19) pandemic, data
on loans and advances subject to COVID-19-related measures have been
collected on the basis of reporting standards developed by the European
Banking Authority. In the fourth quarter of 2020 non-expired loans and
advances subject to EBA-compliant moratoria decreased to €282 billion,
from €766 billion in the second quarter of 2020. In the same period
newly originated loans and advances subject to public guarantee schemes
increased to €340 billion (from €183 billion in the second quarter).
Other loans and advances subject to COVID-19-related forbearance
measures (non-expired) remained broadly stable and stood at €50 billion
at the end of 2020.
Chart 10
Loans and advances subject to COVID-19-related measures by reference period
(EUR billions)
Source: ECB.
Factors affecting changes
Supervisory
banking statistics are calculated by aggregating the data that are
reported by banks which report COREP (capital adequacy information) and
FINREP (financial information) at the relevant point in time.
Consequently, changes in the amounts shown from one quarter to another
can be influenced by the following factors:
- changes in the sample of reporting institutions;
- mergers and acquisitions;
- reclassifications
(e.g. portfolio shifts as a result of certain assets being reclassified
from one accounting portfolio to another).
SSM
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