04 July 2016
The European Banking Authority (EBA) published today its second analysis of the level of asset encumbrance across EU banking institutions. The report, which is part of a regular annual monitoring of asset encumbrance, aims to provide important elements for EU supervisors to assess the sustainability of banks' funding sources and their ability to withstand funding stress.
This preliminary analysis conducted by the EBA shows that in December 2015, the overall weighted average encumbrance ratio stood at 25.6% against 25.2% in December 2014. However, the report highlights a wide dispersion across institutions and countries, which is consistent with what was observed in the previous report.
The main sources of asset encumbrance, such as balance sheet liabilities for which banks posted collateral, continue to be repos, covered bonds and central bank funding.
The EBA intends to continue to monitor on a yearly basis trends in the level of total asset encumbrance, the availability of collateral for central bank funding and the use of central bank funding. Streamlined information on this topic will help EU banking supervisors assess how banks can handle funding stress and switch from unsecured to secured funding under stressed conditions.
The report issued today was carried out on the basis of data on asset encumbrance received from a large sample of EU banks and covers five quarters from December 2014 to December 2015.