14 February 2014
The European Banking Authority (EBA) publishes today the risk dashboard for Q4 2013, summarising the main risks and vulnerabilities in the banking sector in the European Union (EU). The dashboard looks at the evolution of Key Risk Indicators (KRI) from 55 banks across the EU in the third quarter of 2013.
Data in this edition of the EBA dashboard illustrates that EU banks' capital positions were fairly stable, although declining RWAs contributed to higher capital ratios. The quality of banks' loan portfolios is still a source of concern, in light of the weak macroeconomic scenario across the EU. Profitability remains at low levels, as the low interest rates environment along with declining lending volumes continue to affect net interest margins. Deleveraging is still progressing, although at a slower pace. Further adjustments in banks' balance sheets are likely to continue in the forthcoming quarters.
The EBA dashboard also highlights that funding conditions in 2013 have markedly improved compared to the previous year. The vast majority of banks, including banks headquartered in non-core countries, is able to cover its funding needs via market funding, including unsecured and new-style debt instruments. However, overall funding conditions remain susceptible to adverse trends, with many banks still substantially relying on central bank funding. Fragmentation of funding markets and uneven cost conditions remain also an issue of concern.
The EBA risk dashboard is part of the regular risk assessment conducted by the EBA and complements the Risk Assessment Report. It is based on Q3 2013 data and takes into consideration the evolution of a set of Key Risk Indicators (KRI) from 55 EU banks that the EBA has been collecting on a quarterly basis since 2009.