08 February 2023

ECB keeps capital requirements steady in 2023, as banks remain resilient

• CET1: weighted average of Pillar 2 requirements set at 1.1%, unchanged from last year
• CET1: weighted average of overall capital requirements and guidance in CET1 rise to 10.7%, up from 10.4%, reflecting impact of macroprudential policies
• Credit risk and internal governance remain key areas for supervisory action

The European Central Bank (ECB) today published the results of its Supervisory Review and Evaluation Process (SREP) for 2022. This process provides an overall assessment of the challenges facing significant institutions, together with the corresponding capital requirements and other supervisory measures that banks are expected to comply with for the year ahead, in order to better face these challenges.

The SREP was conducted amid deteriorating economic conditions and financial market dynamics following Russia’s invasion of Ukraine. Despite the outlook worsening throughout the year, rising interest rates led to improved profitability and capital generation. On average, banks maintained solid capital and liquidity positions, with the vast majority holding more capital than the levels dictated by capital requirements and guidance stemming from the previous SREP cycle. SREP scores have also remained broadly unchanged overall.

“Banks have done well in withstanding the economic impact of the Russian invasion of Ukraine, thanks to their strong capital and liquidity positions, increased profitability and continued improvement in asset quality,” said Andrea Enria, Chair of the ECB’s Supervisory Board. “However, challenges will remain as long as the war drags on, and the effects of rising interest rates warrant careful monitoring. Banks need to address persistent weaknesses, particularly in their risk control and governance frameworks, and to assess future developments in a prudent way”.

SSM

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