EBA: The EU banking sector remains resilient despite pockets of risk stemming from the change in interest rates

14 December 2023

EBA published its annual risk assessment of the European banking system....and publication of the 2023 EU-wide transparency exercise... detailed information, in a comparable and accessible format, for 123 banks from 26 countries across the European Union (EU) and the European Economic Area (EEA).

Highlights of the EBA risk assessment:

• The EU banking sector has proven to be resilient in the aftermath of the banking turmoil in March.
• Capitalisation remains high with an average common equity tier 1 (CET1) ratio at its highest reported point (16%). Underlying profitability has supported banks’ payouts.
• Elevated interest rate levels have so far supported widening interest margins, but this might have reached its turning point.
• Asset quality remains robust, yet subdued economic growth and elevated interest rate levels create pockets of risks.
• Liquidity remains high but it started normalising from its pandemic highest levels.
• Market funding costs have increased in line with interest rates, yet deposits rates have remained comparatively low but might rise going forward.

 

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