EBA calls for caution amid rising geopolitical risks for the EU/EEA banking sector
02 July 2024
It covers the EBA’s common risk assessment; the analysis of banks’ asset encumbrance and funding plan data, with specific chapters dedicated to EU/EEA banks’ Commercial Real Estate (CRE) exposures and EU/EEA banks’ interconnections with non-bank financial intermediaries (NBFIs).
The European Banking Authority (EBA) today published the spring edition of its risk assessment report (RAR). The report covers the EBA’s common risk assessment as well as the analysis of banks’ asset encumbrance and funding plan data, which had previously been published in two separate reports. It also includes specific chapters dedicated to EU/EEA banks’ Commercial Real Estate (CRE) exposures and EU/EEA banks’ interconnections with non-bank financial intermediaries (NBFIs).
Highlights of the EBA risk assessment:
- EU/EEA banks face elevated geopolitical risks coupled with economic and interest rate uncertainty.
- Banks plan to gradually increase their loan exposures. Non-performing loan (NPL) ratios increased for all segments.
- EU/EEA banks have more than EUR 1.4tn in CRE loans.
- EU/EEA banks plan to significantly increase long-term market-based funding. Banks increased the availability of collateral, which can, for instance, be used for funding purposes going forward.
- CET1 headroom above overall capital requirements (OCR) and Pillar 2 Guidance (P2G) has remained at comfortable levels.
- EU/EEA banks’ profitability increased amid a rise in net interest income (NII). Going forward, the rise in NII is expected to stop.
- The relevance of operational risk has grown further. There has been a rise in cyber-attacks, including successful ones.
- NBFI activity has increased in the EU/EEA and worldwide over the past decade.
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