Erhvervsudvalget 2023-24
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RISK ASSESSMENT
REPORT
OF THE EUROPEAN BANKING
AUTHORITY
DECEMBER 2023
 ERU, Alm.del - 2023-24 - Endeligt svar på spørgsmål 104: MFU spm., om en oversigt over EU-landes vedtagelse af ekstraskatter på bankerne med effekt i 2023 og 2024
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PDF
Print
ISBN 978-92-9245-870-6
ISBN 978-92-9245-869-0
ISSN 1977-9097
ISSN 1977-9089
doi:10.2853/634573
doi:10.2853/42223
DZ-AC-23-001-EN-N
DZ-AC-23-001-EN-C
Luxembourg: Publications Office of the European Union, 2023
© European Banking Authority, 2023
Reproduction is authorised provided the source is acknowledged.
For any use or reproduction of photos or other material that is not under the copyright of the European Banking
Authority, permission must be sought directly from the copyright holders.
 ERU, Alm.del - 2023-24 - Endeligt svar på spørgsmål 104: MFU spm., om en oversigt over EU-landes vedtagelse af ekstraskatter på bankerne med effekt i 2023 og 2024
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RISK ASSESSMENT
REPORT
OF THE EUROPEAN BANKING AUTHORITY
DECEMBER 2023
 ERU, Alm.del - 2023-24 - Endeligt svar på spørgsmål 104: MFU spm., om en oversigt over EU-landes vedtagelse af ekstraskatter på bankerne med effekt i 2023 og 2024 ERU, Alm.del - 2023-24 - Endeligt svar på spørgsmål 104: MFU spm., om en oversigt over EU-landes vedtagelse af ekstraskatter på bankerne med effekt i 2023 og 2024
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Contents
Abbreviations
Executive summary
Introduction
1. Macroeconomic environment and market sentiment
2. Asset side
2.1. Assets: volume and composition
2.2. Asset quality trends
3. Liability side: funding and liquidity
3.1. Funding
3.2. Liquidity
4. Capital
5. Profitability
6. Operational risk and resilience
6.1. Operational risk and resilience: general trends
6.2. Digitalisation and ICT-related risks
6.3. Financial crime risks
6.4. Further legal and reputational risks
6.5. Outlook of continued high operational risk
7. Retail risk indicators
8. Policy implications and measures
Annex I: Samples of banks
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List of Figures
Figure 1:
Figure 2:
Figure 3:
Figure 4:
Figure 5:
Figure 6:
Figure 7:
Figure 8:
Figure 9:
Main global supply chain indicators: Global Supply Chain Pressure Index
(GSCPI) and Baltic Dry Index (BDIY)
EU confidence indicators
Dutch Title Transfer Facility (TTF) natural gas price and Brent crude oil price
From the left, iron ore 62% FE (CME-NYMEX) one, copper (COMEX) and
palladium (CME-NYMEX) one), all spot prices
ESTR and Euribor Rates (left) and EUR and USD swap curves (right)
Selected share price indices (relative change since 4 January 2022)
Stock market indices (January 2022 = 100, left) and iTraxx Main and iTraxx
Crossover (bps, right)
House price index for selected countries (Q3 2020 = 100)
Share prices of selected European real estate investment trusts (relative,
since 2 January 2022, YtD)
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Figure 10:
Trend in asset composition (EUR tn), June 2015 to June 2023 (left), and
growth in asset components, June 2022 to June 2023 (June 2022 = 100) (right)
Figure 11:
Asset side composition by country – June 2023
Figure 12:
Ratio of SME (left) and CRE (right) loans at amortised cost to total loans
towards NFCs and households – June 2023
Figure 13:
Growth in loans and advances by segment, June 2022 to June 2023 (June
2022 = 100)
Figure 14:
Portfolios which banks expect to increase in volumes in the next 12 months
Figure 15:
Main impediments for the further development of green retail loans (1 –
not relevant, 5 – extremely relevant)
Figure 16:
Definition of “green” used by banks for different loan segments
Figure 17:
Debt securities in % of assets and dispersion by size of bank - Dec-22
Figure 18:
Unrealised losses from debt securities at amortised cost in bps of CET1
and dispersion by size of bank - Dec-22
Figure 19:
Exposures to non-EEA counterparties by country of domicile (EUR tn) and
YoY % change (rhs)
Figure 20:
Sovereign exposures maturity profile by country – June 2023
Figure 21:
Sovereign exposures as % of Tier 1 capital by country – June 2023
Figure 22:
Trend of EU NPL volumes and trends March 2022 to June 2023 (left) and
NPL ratios by country June 2022 to June 2023 (right)
Figure 23:
NPL cumulative net flows by segment for June 2022 to June 2023 (EUR bn)
Figure 24:
Evolution in stage allocation by EU banks of loans and advances at
amortised cost – June 2022 to June 2023 (left) – and evolution of transfers
of loans between impairment stages – June 2020 to June 2023 (EUR bn) (right)
Figure 25:
Distribution of amortised loans by stages by country (left) and year-on-
year change in stage 1 / 2 / 3 loans by country (%) (right)
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R E P O R T
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T H E
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B A N K I N G
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Figure 26:
Trend in NPL ratios (left) and share of stage 2 (right) for loans at
amortised cost by segment
Figure 27:
Share of past due more than 30 days and less than 90 days to total loans
at amortised cost by type of exposure
Figure 28:
LTV shares for mortgages and CRE (left) and share of CRE with LTV >100%
by country (left)
Figure 29:
Bankruptcy declaration by sector – 2015 = 100
Figure 30:
EU accumulated impairments on performing loans by segment (June 2022 = 100)
Figure 31:
Year-on-year % change in provisions by country and by status of loan– June 2023
Figure 32:
Banks’ expectations on cost of risk (top) and share of ECLs that is
recognised via provision overlays (bottom)
Figure 33:
Banks’ expectations on possible deterioration in asset quality in the next
12 months by segment
Figure 34:
Breakdown of financial liabilities composition by country, June 2023
Figure 35:
ECB lending to the euro area via monetary policy operations, with a focus
on LTRO (EUR bn)
Figure 36:
Euro area average deposit rates, overnight and with maturities above one
year; new business, households and NFCs (%)
Figure 37:
Funding instruments banks intend to focus on in the next 12 months
Figure 38:
Loan-to-deposit ratio (weighted average) and loan-to-deposit ratio dynamics
(trends in numerator and denominator; December 2014 = 100), over time
Figure 39:
Cash spreads of banks’ debt and capital instruments (in bps)
Figure 40:
Absolute yields of banks’ debt and capital instruments (in %)
Figure 41:
Issuance volumes of EU/EEA banks’ debt and capital instruments,
Q1 – Q3 2021 — 2023 (in EUR bn)()
Figure 42:
Issuance volumes of green, social and sustainability bonds issued by EU/
EEA banks, Q1–Q3 2021–2023 (EUR bn)
Figure 43:
LCR evolution and main components of the LCR as a share of total assets
Figure 44:
Evolution of gross outflow requirement (post-weights) as a share of total assets
Figure 45:
Banks’ distribution of the LCR (median, interquartile range, 5
th
and 95
th
percentiles) and composition of liquid assets as of June 2022 (inner circle)
and June 2023 (outer circle)
Figure 46:
Evolution of the LCR by currency (left) and dispersion of the LCR by
currency (median, interquartile range, 5th and 95th percentiles, right; both
for EUR LCR,GBP LCR,USD LCR)
Figure 47:
Evolution of the cross-currency basis swaps
Figure 48:
Net stable funding across EU/EEA countries (left) and net stable funding:
distribution at bank level median, interquartile range, 5
th
and 95
th
percentiles (right)
Figure 49:
Components of the net stable funding ratio (RSF – left, ASF – right)
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Figure 50:
Capital ratios (transitional definitions)
Figure 51:
Leverage ratio buckets (number of banks)
Figure 52:
CET1 requirements incl. Pillar 2 guidance
Figure 53:
CET1 requirements incl. Pillar 2 guidance, by country
Figure 54:
Share of main CET1 capital components (excluding deductions, minority
interests and adjustments)
Figure 55:
CET1 capital components (EUR bn)
Figure 56:
ASW spread differentials of EUR-denominated bonds – AT1 vs. senior
unsecured funding and vs. T2 funding, in absolute terms (bps; left), and in
relative terms (spread differentials as a share of AT1 spreads); the average
shows that of the period 1 September 2022 to mid-March 2023, and mid-
March to end of August 2023)
Figure 57:
Dividends and share buy-backs (in EUR bn, lhs) and payout ratio (rhs)
Figure 58:
Dividends and share buy-backs (in EUR bn, lhs) and payout ratio (rhs), by country
Figure 59:
RWA by type of risk (EUR tn)
Figure 60:
Credit RWA (left) and exposures (right) for selected exposures classes,
excluding e.g. securitisation and equity (EUR tn)
Figure 61:
Year-on-year changes in credit risk RWA and exposures for selected
exposures classes
Figure 62:
IRB parameters PD (left) and LGD (right) for selected exposures classes
Figure 63:
Contribution to the RoE of the main P&L items, comparison between June
2022 and June 2023; calculated as a ratio to total equity
Figure 64:
Annualised return on equity by country
Figure 65:
Variation of PtB ratio of SX7E and S5Bankx indices from September 2022
to September 2023
Figure 66:
Estimated cost of equity variation (top) and by bank size, autumn 2023 (bottom)
Figure 67:
NII as % of NOI
Figure 68:
Contribution to NII (June 2022 to June 2023).
Figure 69:
Quarterly percentage point change in net interest margin in the last quarters
Figure 70:
Breakdown of fee and commission income (June 2023) and variation of its
main components (June 2022 – June 2023)
Figure 71:
CIR by country (June 2023)
Figure 72:
Operating expenses as % of equity by country (June 2023)
Figure 73:
Year-on-year variation and breakdown of operating expenses as % of
equity by country (June 2023)
Figure 74:
Operating expenses as % of equity by business model (June 2023)()
Figure 75:
Correlation of end-2022 inflation rate and June 2022 to June 2023 change
in staff expense and other administrative expense as a proportion of equity
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B A N K I N G
A U T H O R I T Y
Figure 76:
Breakdown of share of other administrative expenses as of June 2023
Figure 77:
Impairments as % of total equity by country, June 2022 and June 2023
Figure 78:
Banks’ expectations of how fintech will affect their business lines
Figure 79:
Banks that have entered or intend to enter within the next two years into
a partnership with a large technology company whose primary activity is
the provision of digital services
Figure 80:
Simple average RoE by region (left) and expected increase in the bank’s
RoE over the next 6 to 12 months (right)
Figure 81:
Correlation between RoE and market RWA as a share of total RWA
Figure 82:
Areas on which the rising interest rates have an effect (% of responding banks)
Figure 83:
Share of loans repricing in the next 12 months (top) and average interest
rate fixation periods for loans at origination (bottom) (% of responding banks)
Figure 84:
Average remuneration increase in bps on debt securities issued by country
between June 2022 and June 2023
Figure 85:
Given rising interest rates, actions banks are considering in relation to
deposits (% of responding banks)
Figure 86:
Measures that banks are primarily taking to reduce operating expenses/costs
Figure 87:
Correlation of staff expense as a share of total operating income with IT
expense as a share of other administrative expenses (left), and correlation
of customers comfortable with online/digital banking with IT expense as
a share of total other operating expenses (right)
Figure 88:
Implementation of a bank-specific tax and characteristics in selected countries
Figure 89:
Deposit betas of EU banks for past and current policy rate increase cycles
Figure 90:
Interquartile range of EU deposit betas for past and current central bank
policy rate increase cycles
Figure 91:
Banks’ expectations on the level of deposit beta for each of the following
portfolios in the next six to 12 months
Figure 92:
EVE vs. NII impact as a share of T1 capital, from parallel upward
movement of the yield curve (excl. those outside 20% impact)
Figure 93:
Interest rate hedge accounting and economic hedge derivatives (notional)
as a share of the sum of book values of bonds and loans at amortised cost
(AC) and fair value through other comprehensive income (FVtOCI), June
2022 (left) and June 2023 (right), average by size class and overall average
as well as overall weighted average
Figure 94:
All interest rate (IR) derivatives (notional) as a share of total assets,
excluding those considered as hedge accounting (HA) derivatives within
the meaning of the applicable accounting standards (left), and interest rate
(IR) derivatives (notional) as a share of total assets for economic hedges
and for hedge accounting (HA)
Figure 95:
Main drivers of operational risk as seen by banks
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Figure 96:
Number of new operational risk events over time, 2014–2022 and total
losses in operational risk as a share of CET1()
Figure 97:
Total losses in operational risk as a share of CET1, by country, December 2022
Figure 98:
Number of major incidents by type
Figure 99:
Service unavailability due to major incidents by commercial channels
affected (million customer hours)
Figure 100:
Incidence of the root causes indicated for the major incidents
Figure 101:
Number of new IT risk events over time, 2014–2022 and losses in IT risk
events as a share of CET1
Figure 102:
Number of cyber-attacks that resulted or could have potentially resulted
in a “major ICT-related incident” in the last semi-annual assessment period
Figure 103:
Level of involvement of banks with the application of the selected
technologies (sample size – 85 banks)
Figure 104:
Level of involvement of banks with the application of the selected
technologies (for comparison, based on the adjusted sample)
Figure 105:
Applications of AI by banks, differentiated by AI methods and approaches
Figure 106:
Banks that use different AI approaches
Figure 107:
Total payments for redress costs in the past three years as % of equity
Figure 108:
Net provisions for pending legal issues and tax litigation as a share of total
assets by country (2022) and for the EU (2020–2022)
Figure 109:
EBA retail risk indicators (summarising overview)
Figure 110:
Share of household loans with forbearance measures over total
household loans (indicator MC1; left) and share of non-performing
loans collateralised by residential immovable property over total loans
collateralised by residential property (MC2; right), both indicators as of
June 2022 and June 2023
Figure 111:
Share of non-performing loans from credits for consumption over all
loans from credits for consumption (OCL1; left) and percentage of deposit
interest expenses paid by banks to households over total household
deposits (PDA1; right), both indicators as of June 2022 and June 2023
Figure 112:
Share of fraudulent card payments over total card payments (CDC1) –
value and volume – 2022 (left) and share of fraudulent payments over total
payments (credit transfers) (OPI1) – value and volume – 2022 (right)
Figure 113:
Change to previous year of the fraud losses borne by card payment users
(CDC2) – from 2021 to 2022 (left) and change to previous year of the fraud
losses borne by consumers (credit transfers) (OPI2) – 2021 to 2022 (right)
Figure 114:
Percentage of people aged 15+ who have a bank account (AFS1) – 2021
(left) and percentage of people aged 15+ who have a debit or credit card
(AFS2) – 2021 (right)
Figure 115:
Percentage of people aged 15+ who borrowed from family or friends (AFS3) – 2021
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Abbreviations
AC
AI
AML
AMLA
APP
ASF
ASW
AT1
BCBS/FSI
amortised cost
artificial Intelligence
anti-money laundering
Anti Money Laundering Authority
asset purchase programme
available stable funding
asset swap
Additional Tier 1
Basel Committee on Banking
Supervision/Financial Stability
Institute
Baltic Dry Index
Bank for International
Settlements
basis points
Bank Recovery and Resolution
Directive
Competent Authority
central bank digital currencies
credit default swap
Common Equity Tier 1
countering the financing of
terrorism
cost-to-income ratio
cost of equity
cost of risk
Common Reporting
Capital Requirements Directive
commercial real estate
Capital Requirements
Regulation
Credit Suisse
Corporate Sustainability
Reporting Directive
critical ICT third-party provider
credit valuation adjustment
Distributed Denaial of Servicies
deposit guarantee schemes
distributed ledger technology
DORA
EBA
EC
ECB
ECLs
EEA
ENISA
ESAs
ESG
ESRB
ETF
EU
EU-SCICF
Digital Operational Resilience
Act
European Banking Authority
European Commission
European Central Bank
expected credit losses
European Economic Area
EU Agency for Cybersecurity
European Supervisory Agencies
Environmental, Social and
Governance
European Systemic Risk Board
Exchange traded fund
European Union
pan-European Union Systemic
Cyber Incident Coordination
Framework
economic value of equity
European reporting System for
material CFT/AML weaknesses
Euro Interbank Offered Rate
pan-European Systemic
Cyber Incident Coordination
Framework
Financial reporting
financial technology
Financial Stability Board
fair value through other
comprehensive income
gross domestic product
global financial crisis
Global Supply Chain Pressure
Index
Global Systemically Important
Institutions
household
holding company
high-quality liquid assets
held to maturity
information and communication
technology
BDIY
BIS
bps
BRRD
CA
CBDC
CDS
CET1
CFT
CIR
CoE
CoR
COREP
CRD
CRE
CRR
CS
CSRD
CTPP
CVA
DDoS
DGS
DLT
EVE
EuReCA
EURIBOR
EU-SCICF
FINREP
Fintechs
FSB
FVtOCI
GDP
GFC
GSCPI
G-SIIs
HH
HoldCo
HQLA
HTM
ICT
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A U THO R ITY
IFRS
IMF
IPCC
IRB
IRRBB
IT
ITS
LCR
LDI
LGD
LTV
M&A
ML
MREL
MRO
MRR
NBFI
NCAs
NFC
NFCI
NII
NIM
NOI
NPL
NSFR
NTI
OCI
OCR
OECD
O-SIIs
P&L
p.p.
P2G
International Financial
Reporting Standard
International Monetary Fund
Intergovernmental Panel on
Climate Change
internal ratings based
interest rate risk on banking
book
Information technology
implementing technical
standards
liquidity coverage ratio
Liability Driven Investment
loss given default
loan-to-value
merges and acquisitions
machine learning
minimum requirement for own
funds and eligible liabilities
main refinancing operations
minimum reserve requirements
non-bank financial institutions
National Competent Authorities
non-financial corporate
net fee and commission income
net interest income
net interest margin
net operating income
non-performing loan
net stable funding ratio
net trading income
other comprehensive income
overall capital requirements
Organisation for Economic Co-
operation and Development
Other Systemically Important
Institutions
profit and loss
percentage points
Pillar 2 Guidance
PD
PEPP
PSD2
PSPs
PtB
QIS
QoQ
QT
RAQ
RAR
REITs
RF
RoA
RoE
RRE
RRI
RSF
RWA
SME
SNP
SRB
STR
SVB
T1
T2
TF
TLAC
TLTRO
TREA
TFF
UK
US
YE
YtD
YoY
probability of default
Pandemic Emergency Purchase
Programme
Payment Services Directive 2
payment service providers
price to book
Quantitative impact study
quarter on quarter
quantitative tightening
risk assessment questionnaire
risk assessment report
real estate investment trusts
resolution funds
return on assets
return on equity
residential real estate
retail risk indicators
required stable funding
risk-weighted assets
small and medium-sized
enterprise
senior non-preferred senior
Systemic Risk Board
suspicious transaction
Silicon Valley bank
Tier 1 capital
Tier 2 capital
terrorist financing
total loss absorbing capacity
targeted long-term refinancing
operation
total risk exposure amount
title transfer facility
United Kingdom
United States
year end
year to date
year on year
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B A N K I N G
A U T H O R I T Y
Executive summary
Macroeconomic uncertainty remains elevat-
ed.
Economic growth in the European Union
and European Economic Area (EU/EEA) has
stagnated in 2023 and the outlook remains
uncertain. Inflationary pressures have proven
persistent despite lower energy prices. Infla-
tion is expected to remain above central bank
targets for the next quarters. Geopolitical
risks have further increased amid the war in
Ukraine and the Middle East crisis, but also
tensions for instance in the Caucasus and
between China and Taiwan. Trade tensions
between the US, Europe and China add to the
overall uncertainty.
Climate-related and broader ESG risks are
increasingly in banks’ focus.
Institutions do
not only bear the risk of possible deteriora-
tion in their asset quality through the occur-
rence of climate-related physical risk events,
but they are also subject to transition risks
through their lending and investment activi-
ties, notably those banks with exposures to-
wards sectors that highly contribute to climate
change. ESG factors are potential triggers of
financial risks to banks’ balance sheets, but
also a source of reputational risk. At the same
time, the integration of ESG considerations
in banks’ funding and lending activities is in-
creasing. Banks consider it as a  key priority
going forward to offer sustainable lending to
a  broad spectrum of clients, including retail,
despite the obstacles identified by the banks,
such as lack of data, transparency and regula-
tory uncertainty.
The impact of higher interest rates resulting
from monetary policy tightening continues to
affect economies worldwide.
This impact has
not yet fully been materialised, but it has so far
contributed to the slowdown in residential real
estate (RRE) markets inter alia due to the in-
creasing cost of mortgages. The commercial
real estate (CRE) market is additionally chal-
lenged by structural factors. Turmoil in finan-
cial markets, such as at United States (US)
regional banks triggered by losses incurred in
US banks’ held to maturity (HTM) portfolio, or
in the United Kingdom’s (UK) insurance sector,
were not least a result of the abrupt change in
the interest rate environment.
Banks’ profits benefit from higher inter-
est rates.
Monetary policy tightening helped
banks to increase their net interest income
(NII) thanks to higher net interest margins
(NIMs). EU/EEA banks’ return on assets (RoA)
and return on equity (RoE) were reported at
their highest levels since the global financial
crisis (GFC), reaching 0.7% and 11% respec-
tively. Although this recovery has been broadly
based, some banks benefited more than oth-
ers depending on their business model or their
asset and liability structure. Profitability could
slow down amid low loan demand and subdued
asset growth, and as funding may become
more expensive,negatively affecting NIMs. Al-
ready high administrative expenses are also
rather set to grow amid pressure on wages,
and impairments might potentially rise.
Lending growth slowed down as demand
is negatively affected by increased interest
rates.
At the same time macroeconomic un-
certainty affected banks’ risk appetite. As a re-
sult, banks have markedly slowed down their
lending business. This effect was more pro-
nounced in mortgage lending as demand for
house purchases declined and banks tightened
their credit standards. An increasing number
of banks appear reluctant to increase CRE and
other corporate lending going forward. The
slowdown in lending could create a  negative
feedback loop on economic growth dynamics.
Signs of asset quality deterioration are lim-
ited.
Despite deteriorating macroeconomic
parameters over the past year, banks’ asset
quality has remained relatively stable. The
non-performing loan (NPL) ratio was at its
all-time low of 1.8% in June  2023. However,
during the first half of this year NPL inflows
were higher than outflows, and banks still re-
ported a  relatively high share of their loans
as stage 2 loans (9.1% of loans). The impact is
more evident for household loans, including
mortgage loans. Concerns around real estate
markets are also manifested in banks’ rising
provisioning against real estate exposures.
The pandemic has led to a deterioration in as-
set quality for its strongly affected sectors,
while for instance energy-intensive sectors
suffered from rising energy costs following the
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outbreak of the Russian war. The EU banking
sector’s global footprint makes it vulnerable
to geopolitical risks as well as idiosyncratic
developments in certain markets, such as US
CRE exposures. Vulnerabilities for banks may
also arise through their sovereign exposures,
including from falling valuations of debt secu-
rities, or through debt sustainability concerns
for over-indebted sovereigns.
Banks have increased their reliance on mar-
ket-based funding.
The overall issuance of
market-based funding has gone up, as have
overall market-funding costs. Going forward,
higher market-based funding costs increase
pressure to raise more deposits, which may
require banks to increase deposit remunera-
tion, which has been so far rather insulated
from higher central bank rates (low “deposit
betas”). It could also challenge some banks to
meet or refinance minimum requirements for
own funds and eligible liabilities (MREL). On the
latter, the EBA estimates that out of 236 resolu-
tion groups included in its MREL monitoring, 57
banks, representing 13% of the sample in terms
of total assets, have not yet reached their MREL
targets as of Q1 2023. Even though the shortfall
appears marginal at 0.4% of risk-weighted as-
sets (RWA) of the total sample, it reaches be-
tween around 4% and 8% in some countries.
Two-thirds of banks have so far issued ESG
bonds.
The issuance volume of green and
sustainable bonds increased in the first nine
months of this year compared to the first nine
months of 2022, which was mainly attribut-
able to strongly increased green senior non-
preferred (SNP) bonds and bonds issued from
holding companies (HoldCos). However, the
ratio of green bonds to total bank debt issu-
ance volume declined in 2023 as total bank in-
struments issuance volume grew faster than
green bond issuance volume.
Liquidity remains high albeit with a decreas-
ing trend.
A  liquidity coverage ratio (LCR) of
160.9% remains at robust levels yet started
normalising from the highest points previously
reported. The decline in the LCR was mainly
due to a decrease of banks’ liquid assets. This
was driven by a decline in cash and reserves,
which still remain the most important part of
liquid assets, with a share of 60%. The share of
government assets and level 1 securities rose
to 21% and 11% of total liquid assets, respec-
tively. The changes in liquid asset composition
were not least driven by the quantitative tight-
ening (QT) of central banks and the European
Central Bank’s (ECB) maturing targeted long-
term refinancing operation 3 (TLTRO-3).
Bank capital levels reach new highs.
The EU
banking sector’s capital ratios reached new
historic highs in June 2023 as banks reported
an average CET1 ratio of 16.0%. Banks’ head-
room above requirements remained at com-
fortable levels. The leverage ratio has also
increased by around 40 bps and stood at 5.7%.
Retained earnings boosted banks’ capital,
while stagnating lending volumes and lower
market risk kept RWA from increasing. Divi-
dend payments and share buy-backs were at
record levels in 2022, with EU/EEA banks dis-
tributing almost EUR 63bn to shareholders,
which compares with EUR 48bn that banks had
planned for at the beginning of 2022.
Operational risk has increased in recent
years, partly driven by geopolitical tensions.
Increasing risks include the risk of loss from
internal failures or external events, miscon-
duct, legal issues and risk of fraud. In addition,
in a context of digitalisation and growing im-
portance of new financial technologies, banks
become more vulnerable to digital and cyber
risks. Banks also face financial crime, money
laundering and terrorist financing risks.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Introduction
This report describes the main developments
and trends in the EU/EEA banking sector
since June  2022 and provides the EBA out-
look on the main risks and vulnerabilities.(
1
)
As in 2022, the December 2023 risk assess-
ment report (RAR) is published along with the
EU-wide 2023 transparency exercise.
The RAR is based on qualitative and quanti-
tative information collected by the EBA. The
report’s data sources are the following:
•
•
•
EU/EEA supervisory reporting,
The EBA risk assessment questionnaire
(RAQs) addressed to banks,
Market intelligence as well as qualitative
micro-prudential information.
The MREL-related data in this report is based
on reporting on MREL and total loss absorb-
ing capacity (TLAC), which covers a sample of
236 banks.(
4
) The text and figures in this re-
port refer to weighted average ratios unless
otherwise indicated.(
5
) The analysis present-
ed in some of the text boxes is based on the
entire population of EU/EEA banking groups
to cover small institutions in the analysis. In
selected cases, some of the analysis covered
in this RAR is based on data from other re-
porting and data submissions, such as pay-
ment incident and payment fraud report-
ing under the Payment Services Directive  2
(PSD2) as well as selected data points from
EU Quantitative Impact Study (QIS) reporting
(monitoring exercise). Respective analysis is
marked accordingly.
The RAQ is conducted by the EBA on a semi-
annual basis, with one questionnaire ad-
dressed to banks.(
6
) Answers to the question-
naire were provided by 85  European banks
(Annex I) during August and September 2023.
The report also analyses information gath-
ered by the EBA from informal discussions as
part of the regular risk assessments and on-
going dialogue on risks and vulnerabilities of
the EU/EEA banking sector. The cut-off date
for the market data presented in the RAR was
end of September 2023, unless otherwise in-
dicated.
The RAR builds on the supervisory report-
ing data that competent authorities submit to
the EBA on a quarterly basis for a sample of
164 banks from 30 EEA countries (131 banks
at the highest EU/EEA level of consolidation
from 26 countries).(
2
) Based on total assets,
the sample covers about 80% of the EU/EEA
banking sector. In general, the risk indica-
tors and other supervisory-reporting-based
charts and analysis are based on an unbal-
anced sample of banks, whereas charts re-
lated to the risk indicator numerator and
denominator trends are based on a balanced
sample.(
3
) When referring to countries in the
following, respective data is based on the
sample of banks applicable for this jurisdic-
tion (see Annex I) if not otherwise stated.
(
1
) With this report, the EBA discharges its responsibil-
ity to monitor and assess market developments and pro-
vides information to other EU institutions and the general
public, pursuant to Regulation (EU) No  1093/2010 of the
European Parliament and of the Council of 24  Novem-
ber  2010 establishing a  European Supervisory Authority
(European Banking Authority) and amended by Regulation
(EU) No 1022/2013 of the European Parliament and of the
Council of 22 October 2013.
(
2
)
3
(
4
) As submission dates for MREL-related reporting are
later than for supervisory-related reporting (COREP, FIN-
REP, etc.) the MREL data in this report is as of March 2023.
See also the EBA’s
MREL Dashboard as of March 2023.
(
5
) There might be slight differences between some of the
risk indicators covered in the
Q2  2023 version of the EBA
Risk Dashboard
and this report as a result of data resub-
missions by banks. The Annex to the Risk Dashboard also
includes a description of the risk indicators covered in this
report and their calculations, and further descriptions are
available in the
EBA’s guide to risk indicators.
(
6
) The results of the RAQ are also published separately,
together with the EBA’s Risk Dashboard, on a semi-annual
basis. These published RAQ booklets (latest
published ver-
sion is from spring  2023)
also include explanations of the
questionnaire and the analysis of the RAQ responses.
Data as of the reporting date 30 June 2023.
( ) Being an unbalanced sample, the number of reporting
banks per country may display minor variations between
quarters, which might accordingly affect quarterly changes
in absolute and relative figures.
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Along with the RAR, the EBA is disclosing
bank-by-bank data as part of the 2023 EU-
wide transparency exercise for four refer-
ence dates (September 2022, December
2022, March 2023 and June 2023). The trans-
parency exercise is part of the EBA’s ongo-
ing efforts to foster transparency and market
discipline in the EU internal market for finan-
cial services, and complements banks’ own
Pillar  3 disclosures, as set out in the EU’s
Capital Requirements Directive (CRD). The
sample in the 2023 transparency exercise
includes 123 banks from 26 countries at the
highest level of consolidation in the EU/EEA
as of June 2023.(
7
) The EU-wide transparency
exercise relies entirely on Common Report-
ing (COREP) / financial reporting (FINREP)
data.
(
7
) The figures for the banks not participating in the EU
transparency exercise are disclosed in an aggregate man-
ner and at the highest level of consolidation in the category
“Other banks”. This is to allow users to reconcile with the
EBA’s full population of EU/EEA largest institutions.
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A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
1. Macroeconomic environment
and market sentiment
The post-pandemic global and European
economies are characterised by stagnant
economic growth, high inflation and high
levels of interest rates. Geopolitical tensions
caused by the ongoing invasion of Ukraine
from Russia, the Middle East crisis, but also
the tensions in the Caucasus as well as be-
tween China and Taiwan, and the trade ten-
sions between China and Western countries
have added to the geopolitical risks and in-
crease uncertainty and downside risks in the
economic outlook. These events do not only
take a  huge humanitarian toll but have also
a material impact on supply chains which has
created inflationary pressures not seen for
many decades in Europe (Figure 1).
Inflationary pressures have also proved
stickier than initially anticipated, eroding
households’ real income. In the EU, core in-
flation was mainly supported by wage growth
in services and persistent demand pressure
in the service sector due to the post-pandem-
ic momentum.(
8
) Elevated inflation led central
banks to tighten their monetary policies at an
unprecedented pace, which had an impact on
consumer and business confidence but also
translated into weakening demand.
Figure 1:
Main global supply chain indicators: Global Supply Chain Pressure Index (GSCPI) and
Baltic Dry Index (BDIY)
Source: Bloomberg
1,000
800
600
400
200
0
-200
-400
Jan-2019
Mar-2019
May-2019
Jul-2019
Sep-2019
Nov-2019
Jan-2020
Mar-2020
May-2020
Jul-2020
Sep-2020
Nov-2020
Jan-2021
Mar-2021
May-2021
Jul-2021
Sep-2021
Nov-2021
Jan-2022
Mar-2022
May-2022
Jul-2022
Sep-2022
Nov-2022
Jan-2023
Mar-2023
May-2023
Jul-2023
Sep-2023
GSCPI
Stagnant and uncertain economic growth
globally
The EU gross domestic product (GDP) growth
forecast decreased to 0.6% (from 0.8%) for
2023, according to the European Commis-
sion’s Autumn Economic Forecast. The retail
trade and industrial production continue to
be above their pre-pandemic levels but are
slowing down in line with the trend in the
overall EU economy. Despite the normali-
sation of the supply chain, external demand
remained weak and exports below the pre-
pandemic level (Figure 1). The consumer
confidence indicator’s variables, i.e. past
BDIY
and expected household financial situation,
intentions to make major purchases and the
general economic situation in their country,
remain below their pre-pandemic levels.
They also remain below their long-term av-
erages, even as inflation pressures have re-
cently eased (Figure 2).(
9
)
(
8
) See the
European Commission Autumn 2023 Economic
Forecast
from November 2023.
(
9
) See the
European Commission Autumn 2023 Economic
Forecast
from November 2023.
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Figure 2:
EU confidence indicators
Source: Eurostat
30.0
20.0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0
-60.0
Jan-2011
May-2011
Sep-2011
Jan-2012
May-2012
Sep-2012
Jan-2013
May-2013
Sep-2013
Jan-2014
May-2014
Sep-2014
Jan-2015
May-2015
Sep-2015
Jan-2016
May-2016
Sep-2016
Jan-2017
May-2017
Sep-2017
Jan-2018
May-2018
Sep-2018
Jan-2019
May-2019
Sep-2019
Jan-2020
May-2020
Sep-2020
Jan-2021
May-2021
Sep-2021
Jan-2022
May-2022
Sep-2022
Jan-2023
May-2023
Retail
Consumers
Services
Industry
Construction
The global real GDP growth came back to
pre-pandemic levels; the latest forecast for
2023 and 2024 is at 3% for each year, accord-
ing to the International Monetary Fund (IMF).
After a strong first quarter in 2023 (1% QoQ),
global growth is estimated to have slowed to
0.5% QoQ in the second quarter.(
10
)
The EU labour market continued to be resil-
ient despite the stagnant economic growth
and high inflationary pressures. In Septem-
ber 2023, the unemployment rate remained
stable and close to its lowest levels in the EU
(6.0%) and the euro area (6.5%). Neverthe-
less, some discrepancies among countries
and sectors were evident.(
11
)
The measures to ensure economic resil-
ience during the pandemic have weighed on
the fiscal debt, with an increase of average
EU government debt of 4.1% compared to the
beginning of 2022. The wind-down of public
support measures has also negatively im-
pacted economic growth in some countries.
The US continued to grow and the growth
forecasts have been revised upwards by 0.3
percentage points for 2023 (to 2.1%) and 0.5
percentage point for 2024 (to 1.5%) given
strong business investment in the second
quarter and resilient consumption growth.
However, savings accumulated during the
pandemic are getting less and wage growth
is slowing down. A  more severe growth re-
duction is expected in the UK for 2023, where
GDP is expected to grow by 0.5% in 2023,
compared to 4.1% in the previous year.(
12
)
For emerging markets, average growth ex-
pectations remained at around 4% for both
2023 and 2024. There is a  wide discrepancy
across these countries. For example, India
and Indonesia were assumed to steadily grow
in 2023 and 2024, by around 6% and 5% re-
spectively, while in Latin America projections
are lower than for other emerging countries.
(
13
) In addition, the Middle East crisis has
made the economic outlook highly uncertain.
China’s weak economic outlook in the second
quarter has caused concerns globally. The
poor performance of the labour market, es-
pecially of youth employment, has resulted in
a cut of the GDP growth forecast from 5.5%
to 4.2% in 2024 according to the IMF. Sources
have reported a confidence crisis expressed
by a high level of savings, a slowdown of in-
vestments and worries around the real es-
tate market performance in China. Following
the difficulties of the second quarter, the Chi-
nese government started the implementation
of policy easing measures to support private
consumption and real estate transactions.
Energy prices retreated yet volatility
remains
During 2023, the prices of both oil and gas
experienced a  significant reduction with re-
spect to the peaks reached during 2022, with
the gas prices dropping by around 80% in
(
12
) See the
IMF World Economic Outlook, October 2023.
(
13
) See the
OECD Economic Outlook, Interim Report,
September 2023
and
IMF World Economic Outlook,
Octo-
ber 2023.
( ) See the
IMF World Economic Outlook, October 2023.
10
11
( ) See the
European Statistical Recovery Dashboard of
September.
16
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
September 2023 compared to their peaks in
August 2022. On the other hand, while the oil
price also followed a decreasing trend, it has
been more volatile as it is more affected by
global macroeconomic uncertainty. The price
of Brent crude oil has increased materially
since July 2023 and has recently picked up
pace, not least due to the Middle East crisis
(Figure 3).
Figure 3:
Dutch Title Transfer Facility (TTF) natural gas price and Brent crude oil price
Source: Bloomberg
350
300
250
200
150
100
50
0
01/04/2022
17/02/2022
04/04/2022
18/05/2022
07/01/2022
16/08/2022
29/09/2022
14/11/2022
28/12/2022
02/10/2023
28/03/2023
05/11/2023
26/06/2023
08/09/2023
31/08/2023
135
125
115
105
95
85
75
65
01/03/2022
14/02/2022
28/03/2022
05/10/2022
21/06/2022
08/02/2022
13/09/2022
25/10/2022
12/06/2022
18/01/2023
03/01/2023
13/04/2023
25/05/2023
07/06/2023
May-23
17/08/2023
Jul-23
Sep-23
Other commodities showed different pricing
trends following their peak when the Russian
war broke out. Whereas, for instance, iron
ore and copper moved rather sidewards af-
ter a  contraction following the Russian war;
palladium showed a more continuous decline
also in the following months. In any case the
price dynamics for commodities have re-
mained characterised by volatility (Figure 4).
Figure 4:
From the left, iron ore 62% FE (CME-NYMEX) one, copper (COMEX) and palladium
(CME-NYMEX) one), all spot prices
Source: S&P Capital IQ
Copper (COMEX) spot price
6
180.00
160.00
140.00
4
2,500.00
120.00
100.00
3
80.00
2
60.00
1,000.00
40.00
1
20.00
0.00
Mar-2022
May-2022
Nov-2022
Mar-2023
May-2023
Jan-2022
Jul-2022
Sep-2022
Jan-2023
Jul-2023
Sep-2023
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
500.00
0.00
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
1,500.00
2,000.00
Iron ore 62% FE (CME-NYMEX) spot price
3,500.00
3,000.00
Palladium (CME-NYMEX) spot price
5
0
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Inflation pressures are receding, but at
a lower pace than expected
The inflationary pressures moderated re-
cently. Global headline inflation was down
from 7.4% in October 2022 to 4.2% in June
2023. This is not least owing to lower energy
prices and the easing of supply chain pres-
sures. Another factor contributing to the
easing of pressure is weaker than initially
anticipated Chinese internal demand after
COVID-19-related confinement measures
were lifted. Yet core inflation has proved
more persistent. Global inflation, excluding
energy and food, stood at 4.9%. In the euro
area, the reduction in energy prices helped
the headline inflation to move below 4% in
October 2023 (2.9% for the euro area), while
food, industrial goods and services inflation
remained elevated. Although economists
expect easing of services prices in the last
quarter of the year, the recent increases in
energy prices, also due to Middle East crisis,
could refuel inflation pressures.
To tackle inflationary pressures and bring in-
flation closer to their targets, central banks
have engaged in monetary tightening at an
unprecedented pace. Given the easing of in-
flationary pressures, an increasing number
of jurisdictions seem to have reached their
assumed peak, with some countries already
reducing interest rates. Although the uncer-
tainty around macroeconomic outlook chal-
lenges any possible forecast, the expecta-
tion is that interest rates will stay at elevated
levels for more quarters to come (“high for
longer”), not least while inflation is expected
to remain above central banks’ targets for
a  prolonged time. As uncertainty persists
around both inflation and economic growth,
the trajectory of interest rates also remains
uncertain. Monetary policy feeds through
market rates, too. Interbank lending costs
and the associated benchmark rates, such as
the EURIBOR rates and swap rates, have in-
creased substantially over the last year. EUR
and USD swap yield curves shifted up and the
curves have been inverted depicting a nega-
tive slope (Figure 5).
Figure 5:
ESTR and Euribor Rates (left) and EUR and USD swap curves (right)
Source: Bloomberg
5%
4%
3%
2%
1%
0%
18/01/2022
15/02/2022
15/03/2022
04/12/2022
05/10/2022
06/07/2022
07/05/2022
08/02/2022
30/08/2022
27/09/2022
25/10/2022
22/11/2022
20/12/2022
17/01/2023
14/02/2023
14/03/2023
04/11/2023
05/09/2023
06/06/2023
07/04/2023
08/01/2023
29/08/2023
6%
5%
4%
3%
2%
1%
0%
6 MO
9 MO
12 MO
18 MO
2 YR
3 YR
4 YR
5 YR
6 YR
7 YR
8 YR
9 YR
10 YR
12 YR
15 YR
20 YR
25 YR
30 YR
40 YR
50 YR
-1%
3 Month
6 Month
12 Month
ESTR
EUR swap curve - 18/09/2023
USD swap curve - 18/09/2023
EUR swap curve - 30/06/2022
USD swap curve - 30/06/2022
Central banks have also started to exit from
their quantitative easing programmes or
started quantitative tightening. In the case
of the euro area, the asset purchase pro-
gramme (APP) stood at EUR 3,302bn at the
end of September 2023 and reinvestments
were stopped since July 2023.(
14
) Regarding
the Pandemic Emergency Purchase Pro-
gramme (PEPP), the maturing principal pay-
ments from securities will be reinvested until
at least the end of 2024. Since 2020, the PEPP
accounts for EUR 1,850bn invested in public
and private securities. The ECB’s TLTROs
amount has significantly decreased in 2023.
In October 2022, the TLTROs modalities were
reviewed. After the last voluntary repayment
in September related to the TLTROs, the ECB
balance sheet shrank by EUR 91bn to EUR
7.2tn.(
15
) Furthermore, the ECB decided in
July to cut the interest rate for its minimum
reserve requirements (MRR) to zero as of 20
September 2023.(
16
)
(
15
) See the
IMF Global Financial Stability Report, October
2023.
(
16
) See the
ECB’s statement on the decision to set the re-
muneration of minimum reserves at 0%
from July 2023.
( ) See the ECB’s
Asset purchase programmes.
14
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R E P O R T
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B A N K I N G
A U T H O R I T Y
Uncertainty also affects financial markets
The increase in interest rate levels resulted
in slower economic growth and has the po-
tential to negatively affect financial markets.
In March 2023, the US banking sector came
under stress after the failure of the three
regional banks Silicon Valley Bank, First Re-
public and Signature Bank (March banking
turmoil). In Europe, uncertainty manifested
itself in the bank run on Credit Suisse (CS)
and the resulting takeover by UBS (Figure 6).
These events caused elevated market volatil-
ity, including short-lived contagion to equity
prices and credit default swap (CDS) premia
for certain European banks. The structure of
the CS takeover with the write-down of Ad-
ditional Tier 1 (AT1) bonds, while equity in-
vestors received payouts – in the form of UBS
shares  – added to the overall uncertainty in
banks’ bond markets for several weeks fol-
lowing the event. This had a relatively strong
impact on instruments with lower seniority.
The joint statement of the SRB, the EBA and
ECB Banking Supervision published immedi-
ately after the CS takeover clarified the sta-
tus of AT1s in the EU, while other steps taken
by regulators in the US and the EU provided
the necessary transparency in maintaining
trust in the banking industry.(
17
)
The aftermath of the March banking turmoil
resulted in the European banking sector’s
underperforming equity prices, the widening
of credit spreads, and the temporary closing
down of the AT1 primary market (see textbox
on AT1s in the aftermath of the spring crisis
in Chapter 4). However, on a year to date (YtD)
basis the Euro Stoxx Banks index has per-
formed better than the general Euro Stoxx
(Figure 7).
The European banking index (EURO Stoxx
banks) grew by 26% between September
2022 and September 2023, outperforming
significantly the general index (12%), despite
the price correction in March 2023. CDS
spreads for investment grade (iTraxx Main)
remained almost stable for the whole of
2023. The spread for sub-investment-grade
instruments (iTraxx Crossover) of European
corporates decreased by 157 bps from Sep-
tember 2022 to September 2023 (Figure 7).
Figure 6:
Selected share price indices (relative change since 4 January 2022)
Source: S&P Capital IQ
20
10
0
-10
-20
-30
-40
Feb-2022
Apr-2022
May-2022
Jul-2022
Aug-2022
Sep-2022
Oct-2022
Nov-2022
Dec-2022
Feb-2023
Apr-2023
May-2023
Jul-2023
Aug-2023
Mar-2022
Mar-2023
EURO STOXX Index
FTSE Chi Banks Index
EURO STOXX Banks Index
Hang Seng Index
KBW Nasdaq Bank Index
Dow Jones Banks Index
Dow Jones Industrial Index
(
17
) See the
SRB, EBA and ECB Banking Supervision state-
ment
from March 2023. The Bank of England
issued a sepa-
rate statement.
Sep-2023
Jan-2022
Jun-2022
Jan-2023
Jun-2023
-50
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Figure 7:
Stock market indices (January 2022 = 100, left) and iTraxx Main and iTraxx Crossover
(bps, right)
Source: Bloomberg
120
800
700
600
100
500
400
80
300
200
100
Jun-2022
Nov-2022
Jun-2023
Jan-2022
Feb-2022
Mar-2022
Apr-2022
May-2022
Jun-2022
Jul-2022
Aug-2022
Sep-2022
Oct-2022
Nov-2022
Dec-2022
Jan-2023
Feb-2023
Mar-2023
Apr-2023
May-2023
Jun-2023
Jul-2023
Aug-2023
Sep-2023
Jan-2022
Mar-2022
May-2022
Sep-2022
Jan-2023
Mar-2023
May-2023
Sep-2023
60
0
Euro stoxx 600
Euro stoxx banks
ITRX XOVER CDSI GEN 5Y Corp
ITRX EUR CDSI GEN 5Y Corp
Higher interest rates affect the real estate
markets
Monetary tightening also affects both RRE
and CRE sector dynamics. The cost of mort-
gage lending due to higher interest rates has
increased significantly over the last year and,
as a consequence, housing demand has been
dented. On the RRE market, there has been
a broad adjustment in prices.(
18
) Compared to
last year, house prices in the EU decreased
on a  broad average by  -1.1% in Q2, while
rents increased steadily.(
19
) However, there
has been wide divergence of pricing trends
across EU countries. The corrections were,
for instance, more pronounced in Germany
and other northern countries, whereas Spain
and eastern Europe hardly saw any decline in
real estate prices, with only rare exceptions
(Figure 8).(
20
)
Figure 8:
House price index for selected countries (Q3 2020 = 100)
Source: Eurostat
135.00
130.00
125.00
120.00
115.00
110.00
105.00
100.00
95.00
90.00
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep- 21
Oct-21
Nov-21
Dec-21
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Germany
France
Italy
Sweden
Spain
Netherlands
EU average
(
19
) See the
Eurostat housing price statistics.
( ) See for instance
the BIS Annual Economic Report 2023.
18
(
20
) See the
European Commission Summer Autumn 2023
Economic Forecast
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
CRE prices, on the other hand, have already
corrected in many jurisdictions across Eu-
rope. Transaction volumes have declined at
a  rate similar to that seen only in the GFC.
(
21
) Structural changes affecting demand for
office buildings in the post-pandemic era
and market uncertainty are two of the main
causes of the current trend. Data shows wide
dispersion among countries as well as asset
classes and locations. On average, the office
and retail segments saw the biggest correc-
tions in the first half of the year. Looking at
the market data, European real estate invest-
ment trust (REIT) shares on a broad average
declined in the last two years.
Figure 9:
Share prices of selected European real estate investment trusts (relative, since
2 January 2022, YtD)(
22
)
Source: S&P Capital IQ
40
20
0
-20
-40
-60
-80
-100
Jan-22
Feb-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Jun-23
Jul-23
Aug-23
Sep-23
Mar-22
May-22
Mar-23
May-23
Oct-23
Apr-22
Apr-23
GFC
LI
CAST
TEG
MONT
COVH
Climate change effects are impending
The sixth IPCC Assessment Report highlights
that human-caused climate change already
affects many regions across the globe, with
more frequent adverse events reported and
elevated damages, increasingly significantly
affecting human lives.
The 2023 summer was the hottest on record
globally. Besides the occurrence of wildfires,
prolonged dry periods caused rivers and
lakes to further dry up, impacting all life de-
pendent on them. At the same time, soils are
getting drier, leading to turndowns in agri-
cultural productivity. On the other side, there
are some regions which experience intense
downpours or floods, damaging property and
infrastructure.
(
21
) See the
ECB Financial Stability Review,
May 2023.
(
22
) Abbreviations of REIT names: LI-Kleppiere, CAST-Cas-
tellum, MONT-Montea NV, TEG-TAG Immobilien, COVH-Co-
vivio, GFC-Gecina. These REITs are examples and might be
considered for indicative trends of different CRE segments
and different countries. They also inherit idiosyncratic risks,
for which reason they cannot be considered as fully repre-
sentative, though. Kleppiere tends to focus on the shopping
malls segment; Castellum is a REIT in the Nordics; TAG Im-
mobilien is a REIT with a focus on German real estate; Mon-
tea tends to focus on logistics real estate; Covivio tends to
focus on the hotel segment; Gecina tends to focus on Paris
in the residential/student houses sector. This information is
indicative only and high-level.
In Europe, mounting climate risks, also illus-
trated by the extreme weather conditions and
unprecedented wildfires and floods this year,
have the capability to significantly weigh on
human lives and economic development. The
materialisation of these risks bears severe
costs for the economy, in terms of losses in
natural capital and deterioration of economic
activity, such as tourism or agriculture.
As pointed out by the European Environment
Agency, between 1980 and 2021 weather-
related and climate-related extreme events
caused economic losses estimated at EUR
560bn in the EU Member States, of which
EUR 56.6bn is attributable to the year 2021.
(
23
) Floods accounted for over 45% and me-
teorological events (i.e. storms including
lightning and hail, together with mass move-
ments) for almost one-third of the total eco-
nomic losses. Heat waves were responsible
for over 13% of the total losses while the
remaining amount was caused by droughts,
forest fires and cold waves together. Given
their uncertain nature, the exact timing and
the severity of the risks stemming from cli-
mate change are hard to predict and there-
fore require prudent management.
(
23
) See
Economic losses from weather- and climate-relat-
ed extremes in Europe – 8th EAP
from October 2023.
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Box 1: Banks’ climate risk assessment of
assets and disclosures
Climate risk  – and environmental, social
and governance (ESG) risk in general  – is
becoming an increasingly important risk.
The realisation of climate risks could not
only reduce the quality of the assets held
on banks’ balance sheets but could also af-
fect a bank’s reputation. However, it is cur-
rently uncertain to what extent these risks
affect and are reflected in risk differentials
and pricing.
The continuation and increasing intensity
of acute climate events in 2023, e.g. wild-
fires and floods across Europe, show that
climate-related physical risk will continue
to drive financial losses for banks through
their exposures subject to such events.
The transition risk that banks are facing
through their lending and investment ac-
tivities towards sectors that highly contrib-
ute to climate change, as well as the green-
house gas emissions financed through
these activities, also remains material and
needs to be monitored and managed care-
fully. This is particularly relevant in the
short run due to the immediate impact in
case of an increase in energy prices. It is
also relevant in the medium and long run
given the renewed efforts required to ac-
celerate the transition towards renewable
energy resources and a  more sustainable
economy. Banks are hence expected to act
in a  timely and proactive manner to man-
age those challenges.
Disclosure requirements, together with
other regulatory initiatives, are funda-
mental in this endeavour, capturing banks’
respective risks and vulnerabilities. They
also support a more accurate valuation of
banks’ respective assets and increase the
availability and transparency of informa-
tion on banks’ exposure to climate risk,
which in turn helps investors take more
informed decisions.
From the beginning of 2023, banks started
to disclose climate-related risks associat-
ed with their lending and investment activi-
ties in accordance with the implementing
technical standards (ITS) introduced under
Article 449a of the Capital Requirements
Regulation (CRR).
Anecdotal evidence shows that market
analysts and investors started to look into
ESG risk profiles of banks’ exposures.
While action by the financial sector needs
to increase substantially going forward,
the overall direction of travel is clearly to-
wards reducing banks’ financed emissions.
According to analysts’ reports of Pillar 3
public disclosures, EU banks tend to re-
duce their exposures to fossil-fuel-related
corporates in general, and those excluded
from the EU’s Paris-aligned benchmarks
in particular. These trends need to be mon-
itored and substantiated going forward. At
this stage, banks’ efforts and processes on
the disclosure of Pillar 3 ESG information
are still evolving and developing (as are
other related regulatory requirements in
this area, e.g. the Corporate Sustainability
Reporting Directive (CSRD)). Revisions to
data, for instance, imply that the reliability
of trends and information should continu-
ously improve going forward.
While the availability and quality of data for
the assessment of climate-related finan-
cial risks should improve, the main priority
for banks remains to develop techniques to
identify how and to what extent ESG risks
translate into financial risks. This implies
for banks to be able to identify whether
a realised loss is linked to climate-related
factors, and the extent to which the market
prices climate risk and these risks are also
reflected in traditional risk categories, as
well as to incorporate climate-related fac-
tors in their own assessments.(
24
)
Data availability or other limitations in
linking climate risk to traditional catego-
ries of financial risks remain a  challenge
for risk differentials and pricing. Histori-
cal evidence alone is not sufficient to cap-
ture climate-related financial risk which
is more forward-looking in nature. Hence,
it is important that banks further develop
scenario analysis which is expected to cap-
ture forward-looking features of climate
risk. Data from current risk-based public
disclosures can help banks in building up
those analyses.
(
24
) See the EBA’s
Report on the role of environmental
and social risks in the prudential framework,
October
2023.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
2. Asset side
The current macroeconomic environment
has already had an impact on asset growth.
Banks reported slow loan growth since Sep-
tember 2022, as demand for loans is sub-
dued while banks’ risk appetite is limited.
The effects of this slowdown could translate
into lower economic growth in the medium
term. However, immediate vulnerabilities
may arise across the asset side as borrow-
ers’ debt servicing capacity is increasingly
impaired due to higher interest rate levels.
In addition, geopolitical risks could not only
challenge banks with exposures in regions
with rising tensions but also those with
a global footprint.
Asset quality has remained robust, yet there
are some early warning signs, such as NPL
inflows being larger than outflows, or an in-
crease in past-due loans. Even though a de-
terioration is not yet evident in real estate ex-
posures, the overall slowdown in real estate
markets could potentially manifest itself in
future impairments. In addition, those sec-
tors that were hit by the pandemic and have
not been able to recover fully or those sec-
tors that are energy-intensive may see their
asset quality being challenged.
also manifested in slowing growth of EU/EEA
banks’ exposures towards the sector for both
CRE and RRE. Pockets of risks also emerge
through banks’ exposures in non-EEA coun-
tries, as global growth concerns arise and
problems in the US-related CRE sector be-
come apparent. The abrupt change in the
interest rate environment brings attention
to the risk management of debt securities
at amortised cost, including sovereign expo-
sures.
Cash balances and subdued loan growth
limit asset expansion
Since the Russian invasion in Ukraine, Eu-
rope has gone through a  highly volatile and
uncertain macroeconomic environment. This
is due to persistently high inflation, subdued
economic growth, low business and consum-
er confidence, and the increasing levels of
interest rates. Geopolitical uncertainty also
affects supply chains and amplifies the down-
side risks for economic growth. All these
have contributed to the subdued demand for
loans. At the same time EU/EEA banks’ risk
appetite to expand their balance sheets was
constrained, and they have tightened materi-
ally their credit standards on new loan origi-
nation. In the euro area, banks mainly used
their excess cash reserves to repay the ECB’s
TLTRO-3 facilities.
Consequently, in June 2023 EU banks re-
ported total assets of EUR 27.6tn, a decrease
of close to EUR 550bn (or  -1.9%) since June
2022. This was mainly a result of a reduction
of close to EUR 540bn in cash balances and
comparatively low year-on-year (YoY) growth
in loans (+1% YoY) (Figure 10). Outstanding
total loans reported by EU banks as of June
2023 were just above EUR 17.1tn. Although
marginally higher than compared to June
2022, the growth rate has noticeably slowed
down compared to the previous year (7.5%
from June 2021 to June 2022).
2.1. Assets: volume and
composition
Macroeconomic uncertainty and monetary
tightening have weighed on asset growth
as banks have been tightening their credit
standards and demand for loans is materi-
ally dented.(
25
) At the same time, maturing
TLTRO facilities have significantly reduced
banks’ cash balances. As a  result, asset
growth reported during previous years has
stopped. Given the continued uncertain mac-
ro environment, banks expect this trend to
continue as banks’ risk appetite is impaired
and consumer and business confidence are
low. The slowdown in real estate markets is
(
25
) See, for instance, the
ECB’s Bank Lending Surveys,
last edition from October 2023.
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EU RO PEAN
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Figure 10:
Trend in asset composition (EUR tn), June 2015 to June 2023 (left), and growth in asset
components, June 2022 to June 2023 (June 2022 = 100) (right)
Source: EBA supervisory reporting data
35
30
25
20
15
10
5
0
Dec-2022
Mar-2023
Jun-2015
Jun-2016
Jun-2017
Jun-2018
Jun-2019
Jun-2020
Jun-2021
Jun-2022
Sep-2022
Jun-2023
130
120
110
100
90
80
70
60
Dec-2022
Mar-2023
Jun-2022
Sep-2022
Jun-2023
Debt Securities
Other Assets
111
105
101
98
92
85
Cash Balances
Loans and advances
Total Assets
Equity
Derivatives
Debt Securities
Other Assets
Cash Balances
Loans and Advances
Total Assets
Equity Instruments
Derivatives
The decrease in the cash balances reported
by the EU/EEA banks was significant, not
only because they were reduced by around
12.7% YoY, but also because of the reversal
in the trend of piling up on cash by the banks
since the outbreak of the pandemic in 2020.
As of June 2023, banks reported EUR 3.7tn of
cash balances in their books. This is still 29%
higher than what was reported in the outset
of the pandemic, contributing to the com-
paratively high liquidity ratios reported (see
Chapter 4 on the LCR).
In Q2 2023, EU banks reported EUR 1.7tn in
derivative exposures (27% lower from Sep-
tember 2022 levels). The decrease in deriva-
tive exposures was another contributor to the
decrease in EU banks’ total assets. Deriva-
tive exposures are not least driven by inter-
est rates that affect the valuation of rate-
related derivatives, such as interest rate
swaps. Interest rate curves have been on an
upward trend, which might accordingly result
in volatility in derivatives (see Chapter  1 on
interest rate developments). The turmoil in
energy and commodity markets during sum-
mer 2022, caused by very high levels of gas
prices, led to an increase of banks’ respec-
tive derivative exposures. As energy prices
normalised over the last year, exposures to-
wards related derivatives were accordingly
affected.
Contrary to the above, in June 2023 EU banks’
exposures to debt securities grew on a yearly
basis by close to EUR 166bn (5.1% YoY). The
increase was even more pronounced dur-
ing the first half of 2023, as banks increased
their debt securities holdings by EUR 316bn
(10.1% YtD). One explanation could be that
banks aimed to take advantage of the higher
interest rates and lock them in to secure re-
lated earnings for the future.
Following these partially significant volume
changes, the asset composition has changed
accordingly YoY. Loan and advances have the
largest share of total assets (62%), followed
by cash balances and debt securities (13%
and 12% respectively). Derivatives accounted
for 6% of total assets, while equity holdings
are just 1% (Figure 11).
24
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 11:
Asset side composition by country – June 2023
Source: EBA supervisory reporting data
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
AT BE BG CY CZ DE DK EE ES EU FI FR GR HR HU IE IS IT LI LT LU LV MT NL NO PL PT RO SE SI SK
Cash Balances
Equity
Debt securities
Derivatives
Other
Loans
As of July 2023, EU/EEA banks reported ex-
posures towards small and medium-sized
enterprises (SMEs) of EUR 2.5tn, while CRE
loans stood at EUR 1.4tn. Total loans to-
wards NFCs accounted for EUR 6.3tn, up by
0.7% YoY, essentially driven by the increase
in loans towards large corporates (1.6% YoY).
During the same period, outstanding loans
towards SMEs were down by 0.6%, while
loans collateralised by CRE increased by 1%
YoY (Figure 13). For the latter, the underlying
dynamics in the CRE markets and the wor-
rying signs of a  possible downturn have not
deterred banks from increasing their overall
exposures (see Chapter  1). Anecdotal evi-
dence shows an increased demand for loans
from CRE in order to refinance maturing
debt. This is also because refinancing debt
through capital markets became challeng-
ing. The decrease in SME loans is not only
related to demand-side factors but also to
supply-side motives. Since September 2022,
banks have tightened their credit standards
materially, and increased their average mar-
gins for new loans. Although credit stand-
ards have in general become tighter for all
loans, irrespective of their size, the different
evolution observed between large and small
or medium-sized enterprises, despite being
marginal, could signal a  possible crowding
out of funding for smaller-sized firms. Such
underlying dynamics could prove problem-
atic for the economic development of some
jurisdictions in which SMEs play a prominent
role (Figure 12).
In June 2023, close to 79% of banks’ financial
assets were measured at amortised cost,
17% were measured at fair value through
profit and loss (P&L), and 4% were measured
at fair value through other comprehensive
income (OCI). Banks reported EUR 5.6tn of
fair value financial assets, of which 64% were
classified in Level 2 and 5% in Level 3. These
were slightly lower than in June 2022, prob-
ably also reflecting the lower derivative ex-
posures.
Loan growth was muted for both corporates
and households
As a result of the significant monetary tighten-
ing of central banks across Europe, the fast-
growing loan portfolio reported by EU banks
during the post-pandemic period stopped.
The level of interest rates has negatively af-
fected demand for loans for both households
and non-financial corporates (NFCs). At the
same time the heightened macroeconomic
uncertainty and the slower economic growth
have resulted in firms deploying less capital
on fixed investments, while consumer confi-
dence affected demand for household loans.
In June 2023, total outstanding loans towards
NFCs and households accounted for EUR
13.2tn and they were just 0.4% higher than
a year earlier. During the first two quarters of
2023, EU/EEA banks reported negative loan
growth of close to 0.4%.
25
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Figure 12:
Ratio of SME (left) and CRE (right) loans at amortised cost to total loans towards NFCs
and households – June 2023
Source: EBA supervisory reporting data
40%
35%
30%
25%
20%
15%
10%
5%
0%
AT
BE
BG
CY
CZ
DE
DK
EE
ES
EU/EEA
FI
FR
GR
HR
HU
IE
IS
IT
LI
LT
LU
LV
MT
NL
NO
PL
PT
RO
SE
SI
SK
40%
35%
30%
25%
20%
15%
10%
5%
0%
AT
BE
BG
CY
CZ
DE
DK
EE
ES
EU/EEA
FI
FR
GR
HR
HU
IE
IS
IT
LI
LT
LU
LV
MT
NL
NO
PL
PT
RO
SE
SI
SK
Total loans towards households accounted
for EUR 6.9tn, of which EUR 4.4tn were mort-
gages and EUR 1tn consumer credit. The
different evolution in household sub-seg-
ments was even more evident than in NFC
sub-segments. While outstanding mortgage
loans were down by  -1.6%, consumer credit
loans were up by 3.2%. Following the ECB’s
first interest rate rises in summer 2022,
EU/EEA banks reported a  decline in mort-
gage loan growth. The worsening housing
market prospects in many EU jurisdictions,
along with low consumer confidence due to
an uncertain macroeconomic environment
and the higher levels of interest rates, have
presumably all contributed to significantly
weakened demand for loans for house pur-
chase. In parallel, banks have tightened their
credit standards due to higher risk percep-
tions. The decrease in mortgage loans has
also been driven by early repayments (full or
partial) of outstanding mortgage loans with
variable rates, in an effort by borrowers to
mitigate the impact of higher interest rate
levels, and as they had built up deposits dur-
ing the times of the pandemic. Demand for
consumer credit was higher than demand for
house purchases, yet respective loan growth
was still subdued during the last quarters.
A possible explanation could be that borrow-
ers have extended their credit in response to
rising living costs to meet ongoing obliga-
tions (Figure 13).
Figure 13:
Growth in loans and advances by segment, June 2022 to June 2023 (June 2022 = 100)
Source: EBA supervisory reporting data
105
104
103
102
101
100
99
98
97
96
95
Jun-2022
103.2
101.6
101.0
100.7
100.4
100.2
99.4
98.4
Sep-2022
Consumer credit
Households
SMEs
Dec-2022
Large Corporates
Total loans to NFCs and HHs
Mortgages
Mar-2023
Non-financial corporates
CRE
Jun-2023
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At country level, loan volumes grew at vari-
ous rates depending on the underlying mac-
roeconomic environment of each jurisdiction
as well as their market dynamic specificities.
For example, German banks reported a mar-
ginal decrease in their outstanding loans to
households (-0.3% YoY) while they reported
an increase in NFC loans (1.1% YoY). By con-
trast, French banks increased their NFC and
household loans by 3.7% and 2.7% respec-
tively on a  yearly basis. Yet, French banks
reported a  decrease in mortgage loans by
3.4% YoY. Similarly, Spanish banks reported
an increase as well in NFC and household
loans, although of a smaller magnitude (0.9%
and 0.7%).
External environment affects sector-
specific loan growth
The economic slowdown in Europe, includ-
ing the levelling out of real estate, is also re-
flected in the sectoral loan growth reported
between June 2022 and June 2023. EU/EEA
banks decreased their exposures towards
cyclical sectors such as mining and quar-
rying (-15%), transport and storage (-6%),
hospitality-related sectors (-4%) and manu-
facturing (-1%). Loans towards real-estate-
related sectors such as real estate activi-
ties and construction remained fairly stable
over the last year. Real estate activities had
the lion’s share of NFC loans (25%), while
construction accounted for 5% of total NFC
loans. At the same time, EU banks reported
a higher exposure towards the service sector
(public administration, water supply, profes-
sional activities) and digital sectors (informa-
tion and communication).
Banks expect similar loan growth trends in
the next quarters
According to banks’ answers to the EBA RAQ,
the subdued loan growth dynamic will con-
tinue in the next 12 months. Although most
banks, for instance, plan to increase their
exposures towards NFCs (SMEs and/or large
corporates), the trends in both sub-segments
are marginally declining, with a smaller num-
ber of banks expecting an increase in these
portfolios. This trend is more pronounced
in real-estate-related exposures, and es-
pecially for CRE, for which only one-quarter
of the banks plan to increase their expo-
sures. For RRE exposures less than half of
the banks plan to expand their loan volumes.
This compares to more than three-quarters
of banks surveyed two years ago. Lastly, an
increasing number of banks aim to increase
their exposures towards consumer credit,
suggesting that the increase reported during
the last year is expected to continue further
(Figure 14).
Figure 14:
Portfolios which banks expect to increase in volumes in the next 12 months
Source: EBA Risk Assessment Questionnaire
80%
70%
60%
50%
40%
30%
20%
39%
35%
28%
27% 26%
Mar-2023
Sep-2023
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
76%
69%
63%
58% 59%
56%
72%
67%
68%
63%
57% 55%
53%
49% 49% 48%
45%
47%
40%
51%
Sep-2021
Mar-2022
a) CRE
Sep-2022
b) SME
c) Residential Mortgage
d) Consumer Credit
e) Large Corporates
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Box 2: Results of the autumn 2023 RAQ –
general market trends in sustainable
loans
The integration of ESG considerations into
banks’ funding and lending activities con-
tinues. Results of the latest RAQ show that
proceeds-based green loans are the most
commonly offered products (by 86% of
banks) to large corporates. This is directly
followed by performance-based sustain-
ability-linked loans (72%). Approximately
52% and 53% of banks respectively also of-
fer social and sustainability loans to their
large corporate clients. Proceeds-based
green loans are the product category most
commonly offered, also in the SME seg-
ment (by 82% of the banks). Retail clients
by contrast are mainly offered social and
green loans.
Banks’ appetite to offer various sustain-
ability loans mostly to NFCs but also to
SMEs and retail borrowers aligns with the
findings of other analysis performed by the
EBA.(
26
) It shows that credit institutions
expect green loans to continue growing in
the next 24 months, and no credit institu-
tion expects contraction or stagnation in
green loan markets. As a result, it is pos-
sible to expect an increase in the volume of
green loans in all segments of the market.
Furthermore findings are that, while banks
grant green loans across different port-
folios, the share of green loans on banks’
balance sheet remains limited. As various
market participants, especially households
and SMEs, are reliant on banks to have ac-
cess to sustainable finance, banks’ role in
green lending plays an important part in
the transition to a  low-carbon, more re-
source-efficient and sustainable economy.
However, several obstacles still need to
be overcome to increase the overall mar-
ket for sustainable lending. The major-
ity of banks in the RAQ (68%) continue to
see the lack of data and transparency as
one of the main challenges in the further
development of the green loan market. As
other key impediments to market growth,
banks this year again named the uncer-
tainty about future regulatory treatment
(46%) and lack of commonly agreed defini-
tions and standards (36%).(
27
) The uncer-
tainty about the risk-return profile of green
investments and funding and/or capital
constrains in the (re)financing of green re-
tail assets are less of a concern for further
development of the green retail loans mar-
ket according to banks’ answers, with 27%
and 17% of banks respectively considering
these as relevant or extremely relevant as-
pects (Figure 15).
Figure 15:
Main impediments for the further development of green retail loans (1  – not
relevant, 5 – extremely relevant)
Source: EBA Risk Assessment Questionnaire
0%
a) Insufficient customer demand for green loans
(i.e. lack of green retail projects to finance)
b) Lack of commonly agreed definitions/
standards for green retail loans
c) Lack of data/transparency to identify green retail
assets and to assess their environmental impact
d) Uncertainty about the risk-return profile
e) Funding and/or capital constraints
in the (re)financing of green retail assets
f) Uncertainty about future regulatory treatment
g) Other challenges
1
2
3
4
5
5%
10%
15%
20%
25%
30%
35%
40%
45%
(
26
) This includes for example, the analysis carried out
as part of the EBA response to the European Commis-
sion call for advice on green loans and mortgages.
(
27
) Note, however, that the sample of banks included
has changed since the last RAQ.
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There is a  high degree of heterogene-
ity among banks’ definition of “green” or
“sustainable” lending in banks’ definition
of sustainable products. Most banks rely
on their own definition of “green”, followed
by using the EU Taxonomy, where possible.
Between 19% and 27% of the banks cov-
ered in the RAQ agreed that the EU Taxono-
my is currently and going to be in the future
a  main classification standard for various
green products (Figure 16). Going forward,
the regulatory framework needs to ensure
that a  necessary infrastructure around
the Taxonomy, e.g. measures for exchange
of information, is established so that the
market participants benefit from this pub-
lic good and contribute to the growth of
a  well-functioning market for sustainable
lending and investment activities.
Figure 16:
Definition of “green” used by banks for different loan segments
Source: EBA Risk Assessment Questionnaire
0%
10%
20%
30%
40%
50%
a) Secured NFC* loans
b) Secured SME* loans
c) Secured non-SME* retail loans
d) Unsecured NFC* loans
e) Unsecured SME* loans
f) Unsecured non-SME* retail loans
Market standards
Bank's internal framework
EU Taxonomy
Other standards/definitions
Banks increased their investments in debt
securities
The increasing rates have caused debt secu-
rity valuations to fall, yet higher interest rates
could also provide an investment opportunity
for banks’ treasuries, at a period of subdued
loan demand. Also the changes in the bal-
ance sheet composition of EU subsidiaries
of large international banks that previously
passported into the EU from the UK might
have an impact on this increase of debt se-
curities. On a yearly basis, total debt holdings
increased by 5%. Banks in more than half of
the EU/EEA countries increased by at least
10% YoY their total debt securities exposures.
The unprecedented pace in hiking central
bank interest rates has underscored the im-
portance of managing interest rate risk pru-
dently and proactively.
Box 3: Focus on debt securities
recognised at amortised cost following
the US banking turmoil in March this
year(
28
)
The tightening of central banks’ monetary
policies to tackle elevated inflation has in-
creased banks’ interest rate risk in their
banking book (IRRBB). Interest rate risk
(
28
) This analysis is based on a  sample of around 250
banks, to also cover small institutions.
also includes the impact of rate changes on
fixed-rate assets, such as bonds, as their
value fluctuates according to the move-
ment of interest rates. Depending on their
purpose, such bonds can be recognised
at amortised cost under International Fi-
nancial Reporting Standards (IFRSs). This
avoids volatility in a bank’s P&L or capital,
which appears if such bonds are recog-
nised at fair value. However, banks are re-
quired to manage prudently their interest
rate risks, according to the relevant IRRBB
29
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guidelines (see also the textbox on interest
rate risks in Chapter 5).
The failure of some medium-sized US in-
stitutions was a lesson in how vulnerabili-
ties in banks’ business models can expose
them to insufficient risk management
practices. For example, one of the reasons
for Silicon Valley Bank’s (SVB) failure was
the mismanagement of interest rate and li-
quidity risk. The bank’s low diversification
of its assets, high concentration of liabili-
ties and high share of uninsured deposits,
its rapid growth and the complexity of the
bank required vigilant risk management
which the bank failed to apply, and insuf-
ficient supervision failed to appreciate
and mitigate these factors.(
29
) Events have
also shown the effects of the digital era on
banks’ liquidity, as information and depos-
its can move faster than in the past. The
bank run on SVB was, however, triggered
by the bank’s announcement that it had to
realise the loss due to the forced sale of its
debt securities. This has highlighted the
need for an in-depth analysis of not only
banks’ holdings at amortised cost, but also
whether their risk management practices
are appropriate and adequate.
Lessons learned were reflected in the
EBA’s European Supervisory Examination
Programme for 2024, which among oth-
ers requires EU supervisors to assess on
an institution-by-institution basis if practi-
cal impediments to selling securities rec-
ognised at amortised cost exist as well as
to focus on banks’ assumptions about the
stability of their deposit funding in the digi-
tal era and potentially challenge those.(
30
)
In parallel to the EBA EU-wide 2023 stress
test, the EBA ran an ad hoc data collection
on banks’ bond holdings for the same sam-
ple of banks participating in the exercise.
As of February 2023, the total amount of
these banks’ debt securities held at am-
ortised cost was EUR  1.3tn. At the same
reference date, the related total unrealised
losses, net of hedge adjustments, amount-
ed to EUR 75bn, showing an increase since
the end of 2021 as interest rates have been
increasing. The analysis concluded that
banks used hedging to mitigate gross un-
realised losses. As of February 2023, loss-
es were mitigated by hedges amounting to
EUR 38bn.(
31
)
An analysis using financial reporting data
shows that as of December 2022 small
and medium-sized banks had a  higher
share of their total assets in debt securi-
ties. They also tended to recognise more of
these bond holdings at amortised cost than
their larger peers (Figure 17). While in total
banks recognised 50.2% of their debt se-
curities at amortised cost, medium-sized
banks reported 71% and smaller ones
63.8%.
Figure 17:
Debt securities in % of assets and dispersion by size of bank - Dec-22
Source: EBA supervisory reporting data
30%
25%
20%
15%
10%
5%
0%
>100bn
Fair value P&L
100-50bn
Fair value FVOCI
Amortised Cost
< 50bn
3rd Quartile
Total
Median
1st Quartile
(
29
) Board of Governors of the Federal Reserve System –
Federal Reserve’s Supervision and Regulation of Silicon
Valley Bank –
from April 2023.
(
30
) See the EBA’s
examination programme priorities for
prudential supervisors for 2024.
(
31
) EBA report on
ad-hoc analysis of unrealised losses
on EU banks’ bond holdings –
from July 2023.
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As a  result of their higher share of debt
securities to total assets, and recognis-
ing a  higher share of these assets at am-
ortised cost, smaller and medium-sized
banks reported higher unrealised losses,
with a number of smaller institutions being
outliers (Figure 18).(
32
) In addition to this,
there are indications that smaller banks
tend to have fewer interest rate derivatives
for hedging purposes, which might indicate
that they have less mitigation of their unre-
alised losses through hedges (see textbox
on interest rate risk in Chapter 5).
Figure 18:
Unrealised losses from debt securities at amortised cost in bps of CET1 and
dispersion by size of bank - Dec-22
Source: EBA supervisory reporting data
500
450
400
350
300
250
200
150
100
50
0
>100bn
AC
392
43
43
22
89
272
25
121
100-50bn
FVOCI
3rd Quartile
< 50bn
Median
1st Quartile
Total
(
32
) Unrealised losses are those after considering hedge
adjustments coming from designated hedge accounting.
Banks limited the growth towards non-EEA
counterparty exposures
The total exposure of EU/EEA banks towards
non-EU/EEA domiciled counterparties stood
at close to EUR 4.6tn, around 1% higher com-
pared to June 2022. This is in contrast to the
fast growth reported in the previous year
(+9.4% June 2021 to June 2022). This may also
be partly driven by the strengthening of the
euro vis-à-vis other currencies.(
33
) The largest
non-EEA counterparties of EU banks remained
the US (EUR 1.2tn) and the UK (EUR 0.9tn),
while individual exposures to other countries
did not exceed EUR 0.25tn (Figure 19).
Banks’ exposures to emerging economies
grew by 2% compared to June 2022.(
34
) As of
June 2023, the total exposure towards EMEs
was close to EUR 0.86tn, an increase of close
to EUR 18bn compared to the same quarter
(
33
) Indicatively, in July 2023 the nominal effective exchange
rate of the euro reached its highest level since 2008 (see the
ECB’s daily nominal effective exchange rate of the euro).
(
34
) EMEs include in the following analysis the following
countries: Argentina, Bangladesh, Brazil, Chile, China, Co-
lombia, India, Indonesia, Malaysia, Mexico, Pakistan, Peru,
Philippines, Russia, South Africa, Thailand, Turkey, Ukraine
and Venezuela.
in 2022. The most important non-EEA coun-
terparties were Brazil, Mexico, Turkey, Chile,
China and Russia. Exposures towards the
latter two countries decreased substantially
over this period. Direct exposures to Russian
counterparties stood at EUR 38bn (-42% YoY),
while exposures to Chinese counterparties
stood at EUR 56bn (-24% YoY). At the end of
2021, two months before the Russian war,
EU/EEA banks’ exposures towards Russian
counterparties were more than EUR 70bn.
Enduring geopolitical tensions have weighed
on banks’ decisions to gradually limit their
exposures towards Russian counterpar-
ties. Since the Russian invasion in Ukraine,
a number of EU banks have managed to exit
or significantly wind down their operations in
Russia. Geopolitical tensions in other areas,
such as the Middle East, could similarly have
an impact on EU/EEA banks’ balance sheets.
Such an impact could not only manifest itself
in higher credit risk, but also through a  re-
duction of banks’ exposures to certain juris-
dictions, or even through a  complete with-
drawal from areas considered of heightened
risk. Exposures of the European banking sec-
tor to Middle Eastern counterparties totalled
around EUR 130bn, the majority of which was
towards Egyptian and Qatari counterparties.
31
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Figure 19:
Exposures to non-EEA counterparties by country of domicile (EUR tn) and YoY %
change (rhs)
Source: EBA supervisory reporting data
1.4
1.2
1.0
0.8
0.6
0.4
0.2
-
US
Other
GB
BR
MX
Jun-23
JP
CH
KY
YoY % change (rhs)
AU
CA
TR
40%
30%
20%
10%
0%
-10%
-20%
More than EUR 3.5tn of the exposures to-
wards non-EEA counterparties were through
loans and advances. Of these, EUR 1.3tn
were NFC loans mainly towards large corpo-
rates (SME loans were just EUR 250bn), while
household loans were close to EUR 0.8tn.
CRE-related loans accounted for EUR 210bn,
of which EUR 76bn were towards US coun-
terparties, followed by UK-domiciled coun-
terparties (EUR 35bn). Household loans were
dominated mainly by mortgage loans (EUR
460bn), mainly towards UK counterparties
(EUR 290bn). Consumer credit exposures to-
talled EUR 210bn and were dispersed across
the globe: US (EUR 46bn), Brazil (EUR 43bn),
Mexico (EUR 34bn) and the UK (EUR 28bn).
EU banks increase their sovereign
exposures
As of June 2023, EU banks reported around
EUR 3.4tn of total gross carrying amount to-
wards sovereign counterparties. This is up by
almost 8.1% from December 2022 (EUR 3.1tn)
and marginally higher than a year earlier. Half
of these exposures are towards domestically
domiciled counterparties, while around one-
quarter are towards other EU/EEA countries.
Rising interest rates have brought forward
the topic of long-term sovereign debt sustain-
ability, as sovereign funding costs are set to
increase. Jurisdictions with heightened debt
levels will have to refinance maturing debt at
higher interest rates. The maturity profile of
the sovereign debt held by EU/EEA banks is
tilted towards the long end, as at least 45%
of these exposures have a  maturity of more
than five years while 30% have a  maturity
of between one and five years. The largest
share of sovereign exposures is measured at
amortised cost (60%), followed by fair value
through OCI (18%) and held for trading (17%).
Higher rates, at the same time, offer an op-
portunity for banks to roll over maturing
sovereign exposures  – which are mostly
fixed-rate bonds – at higher rates upon their
maturity. This has a positive impact on their
future profitability. However, the maturity
profile of the sovereign debt held by EU/EEA
banks does not support a  quick turnover of
banks’ sovereign exposure (Figure 20).
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Figure 20:
Sovereign exposures maturity profile by country – June 2023
Source: EBA supervisory reporting data
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
EU/EEA banks’ total sovereign exposure ac-
counts for more than double their equity,
while several banks have an exposure to-
wards sovereigns multiple times their equity.
As of June 2023, the sovereign exposure re-
ported by EU/EEA banks was 210% of their
Tier 1 equity (214% in June 2022). However,
Figure 21:
Sovereign exposures as % of Tier 1 capital by country – June 2023
Source: EBA supervisory reporting data
400%
350%
300%
250%
200%
150%
100%
50%
0%
RO
PT
CZ
IT
PL
MT
ES
GR
BE
FR
EU/EEA
HR
AT
HU
DE
NL
LU
SK
SI
FI
BG
SE
CY
IE
DK
IS
NO
LT
EE
LV
LI
Interlinkages with non-bank financial
institutions (NBFIs) becoming increasingly
prominent
Several market upheavals in recent years
were either due to or partially related to
NBFIs, such as the so-called Archegos and
Greensill-related events in 2021, or the UK’s
Liability Driven Investment (LDI) crisis last
year.(
35
) These crisis events showed the com-
plex interlinkages between the banking and
non-banking sectors. They include risks re-
lated to direct exposures, but also liquidity
or funding risks related to such entities, as
(
35
) NBFIs commonly include, but are not limited to, pen-
sions funds, insurance companies, hedge funds, commod-
ity traders, exchange-traded funds (ETF), as well as open-
ended, real estate and money market funds (see the
IMF’s
working paper on lessons from the UK’s LDI crisis
from
September  2023). On the LDI crisis see also
ESMA’s TRV
Risk Monitor ESMA No. 1 2023
from February 2023.
AT
BE
BG
CY
DE
DK
EE
ES
EU/EEA
FI
FR
GR
HU
IE
IS
IT
LT
LU
LV
MT
NL
PL
PT
RO
SE
SI
NO
LI
HR
CZ
SK
0 - 3M
3M - 1Y
1Y - 5Y
5Y - 10Y
10Y - more
there was a  wide divergence of this meas-
ure at both country level and bank-by-bank
level. Banks in central and eastern as well as
southern Europe generally reported a higher
ratio of sovereign exposures to capital (Fig-
ure 21).
33
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well as, for instance, step-in risks.(
36
) Based
on an indicative analysis of EBA supervisory
reporting data, EU/EEA banks’ direct expo-
sures towards NBFIs accounted for around
7% of their total assets.(
37
) They are highly
concentrated in a  few large banks. With re-
gard to liquidity and funding risks, respective
data also shows that NBFIs are, for instance,
one the main buyers of bank bonds.
2.2.
Asset quality trends
first half of this year, while banks reported
a  higher amount of stage 2 loans. The im-
pact is more evident for household loans,
including mortgage loans. Concerns around
real-estate-related exposures have induced
banks to increase their provisioning against
RRE and CRE. Pandemic-hit sectors lead the
asset quality deterioration, while energy-
intensive and real-estate-related firms are
faced with not only abruptly rising borrowing
costs but also inflationary pressures and re-
duced demand.
Non-performing loans: decreasing trend
may have reached its end
Although the NPL volume still decreased by
EUR 10bn (-2.7%) compared to June 2022, the
rate of decrease in NPLs is materially lower
compared to previous years. As of June 2023,
EU banks reported EUR 361bn of NPLs (1.8%
of their total loans and advances), slightly
higher than the lowest ever reported by EU
banks earlier this year (EUR 357bn in March
2023; Figure 22).
The macroeconomic parameters have been
deteriorating over the past year, yet banks’
asset quality has hardly worsened. This is de-
spite the broad expectation that the increase
in interest rates along with the persistence of
inflation and the subdued economic growth
will materially affect asset quality. This may
be explained by low unemployment rates that
have helped borrowers maintain their debt
repayment capacity at vigorous levels and
the liquidity accumulated by corporates and
households during the pandemic. NPL in-
flows were higher than outflows during the
Figure 22:
Trend of EU NPL volumes and trends March 2022 to June 2023 (left) and NPL ratios by
country June 2022 to June 2023 (right)
Source: EBA supervisory reporting data
390
385
380
375
370
365
360
355
350
345
340
Mar-2022 Jun-2022 Sep-2022 Dec-2022 Mar-2023 Jun-2023
1.95%
1.90%
1.85%
1.80%
1.75%
1.70%
1.65%
1.60%
1.55%
1.50%
NPL volumes (EUR bn)
NPL ratio (rhs)
6%
5%
4%
3%
2%
1%
0%
(
36
) On step-in risk see the Bank for International Settle-
ment’s (BIS) summary of step-in risks from August 2021.
(
37
) This analysis is based on FINREP, and NBFIs include
in this case “other financial corporations”, which covers
investment firms, investment funds, insurance companies,
pension funds, collective investment undertakings, and
clearing houses as well as remaining financial interme-
diaries, financial auxiliaries, captive financial institutions
and money lenders. This analysis is based on a sample of
slightly more than 350 banks.
34
GR
PL
HU
PT
CY
ES
RO
IT
MT
HR
BG
FR
AT
IE
SK
SI
LU
NL
DK
IS
BE
DE
CZ
FI
EE
LT
LV
SE
Jun-2022
Mar-2023
Jun-2023
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
The plateau in the trend of NPLs was partly
caused by an increase in NPLs over the sec-
ond quarter of 2023 in a number of countries.
At the same time most smaller banking ju-
risdictions continued to report a  decrease
in their NPL volumes. The highest NPL ratio
was reported by Greek banks (4.6%), followed
by Polish banks (4.4%). The former continued
their balance sheet clean-up by decreas-
ing their NPLs by 19% YoY (EUR 9bn in June
2023), managing to close the gap in NPL ra-
tios to other countries. Polish banks, on the
other hand, reported a slight increase in their
NPL ratios over the last year, as their NPLs
volumes increased by 13% YoY (EUR 6.4bn in
June 2023). This might not least be driven by
the CHF-denominated mortgage exposures.
The change in trends is also reflected in the
reported figures of NPL flows. During 2022,
EU banks reported a total NPL inflow (new-
ly formed NPLs) of EUR 168bn, while at the
same time they reported an outflow of EUR
202bn. As a result, EU banks had a total net
outflow of around EUR 35bn over 2022, which
was already significantly lower than the net
outflow of EUR 70bn reported in 2021. In the
first half of 2023, EU banks reported a  net
inflow of EUR 6bn. This was a result of both
higher NPL inflows (EUR 112bn) as well as
lower NPL outflows (EUR 106bn) compared
to the same period last year (Figure 23).
Although NPL inflows have increased, they
are still mostly compensated by outflows.
The development of secondary NPL markets
and internal or external capabilities to deal
with NPLs, presumably enable EU banks to
quickly address a deterioration in asset qual-
ity. Compared to the previous crisis, in which
NPLs reached over EUR 1tn, banks have the
experience to take a  proactive approach in
tackling the new NPLs. Regulation and su-
pervisory expectations also define this ap-
proach in order to avoid banks building up
again a huge stock in NPLs.
Figure 23:
NPL cumulative net flows by segment for June 2022 to June 2023 (EUR bn)
Source: EBA supervisory reporting data
10
5
-
(5)
(10)
(15)
(20)
(25)
1H 2022
NFCs
2H 2022
Loans and advances held for sale
1H 2023
Other
Households
Stage 2 allocation remained stable at
elevated levels.
Although NPL volumes are being kept in
check, overall credit risk is on the rise. On the
forefront of this are vulnerable over-indebt-
ed households and firms. For households,
high inflation eats into their real income,
and increased interest rate payments exert
pressure on their debt servicing capacity.
Similarly, firms – especially those smaller in
size – are challenged as their profit margins
tighten and their capacity to pass through
rising costs due to inflation is limited.
These risks are already reflected in the al-
location of stage 2 loans, i.e. those loans for
which credit risk has significantly increased
but which are not yet impaired. As of June
2023, banks had classified 9.1% of loans as
stage 2, slightly lower than a  year earlier
(9.5% in June 2022). It compares with a stage
2 ratio of 6.5% before the pandemic broke
out (2019). More than EUR 1.4tn in loans are
considered of elevated credit risk, 3% lower
than a  year earlier. Although the migration
of stage 1 loans to stage 2 was limited com-
pared to previous years, the net migration of
loans towards stages with higher credit risk
(in the meaning of stage 2 and 3 assets) was
still positive.(
38
) During the first half of 2023,
banks moved close to EUR 420bn from stage
(
38
) The analysis does not take into account loans that may
have matured or been repaid, written off or sold by banks.
35
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EU RO PEAN
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A U THO R ITY
1 to stage 2 while they migrated EUR 310bn
in the opposite direction. Similarly, moves to-
wards stage 3 (either from stage 1 or stage
2) accounted for more than EUR 65bn, while
migrations out of stage 3 accounted for just
EUR 20bn. In total, banks moved close to EUR
500bn to lower credit quality stages while
they migrated EUR 330bn to higher credit
quality stages (Figure 24).
Figure 24:
Evolution in stage allocation by EU banks of loans and advances at amortised cost –
June 2022 to June 2023 (left) – and evolution of transfers of loans between impairment stages –
June 2020 to June 2023 (EUR bn) (right)
Source: EBA supervisory reporting data
100%
98%
96%
94%
92%
90%
88%
86%
84%
82%
700
600
500
400
300
200
100
-
Jun-2022 Sep-2022 Dec-2022 Mar-2023 Jun-2023
Stage 1
Stage 2
Stage 3
POCI
From Stage 1 From Stage 2 From Stage 2 From Stage 3 From Stage 1 From Stage 3
to Stage 2 to Stage 1 to Stage 3 to Stage 2 to Stage 3 to Stage 1
Transfers between Stage 1 Transfers between Stage 2 Transfers between Stage 1
and Stage 2
and Stage 3
and Stage 3
Jun-2020
Jun-2021
Jun-2022
Jun-2023
The biggest increases in stage 2 alloca-
tion were reported by banks in central and
eastern Europe and in Nordic countries. In
these countries, the monetary tightening
cycle started earlier than in the euro area,
therefore signs of stress due to higher inter-
est rates may have appeared earlier. Despite
the fact that French and German banks have
driven the increase in NPLs and accord-
ingly stage 3 loans, at the same time they
considerably decreased their stage 2 loans.
French banks reported a  decrease of more
than 10% (EUR 50bn) and German banks of
5% (EUR 10bn) between June 2022 and June
2023. Some countries in southern Europe,
on the other hand, reported a decrease both
in the allocation to stage 2 loans and in their
exposures to stage 3 loans. Macroeconomic
dynamics in these countries do not materi-
ally differ from other countries that reported
a  worsening asset quality outlook. Yet bal-
ance sheet clean-up is still ongoing in coun-
tries such as Greece, Cyprus and Italy. In
addition limited exposures to CRE or certain
particularly vulnerable sectors, for example
energy-intensive sectors, may also drive this
divergence in trends (Figure 25).
36
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 25:
Distribution of amortised loans by stages by country (left) and year-on-year change in
stage 1 / 2 / 3 loans by country (%) (right) (
39
)
Source: EBA supervisory reporting data
100%
95%
90%
85%
80%
75%
70%
AT
BE
BG
CY
CZ
DE
DK
EE
ES
EU
FI
FR
GR
HR
HU
IE
IS
IT
LI
LT
LU
LV
MT
NL
NO
PL
PT
RO
SE
SI
SK
80.0%
60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
Stage 1
Stage 2
Stage 3
POCI
AT
BE
BG
CY
CZ
DE
DK
EE
ES
EU
FI
FR
GR
HR
HU
IE
IS
IT
LI
LT
LU
LV
MT
NL
NO
PL
PT
RO
SE
SI
SK
Stage 1
Stage 2
Stage 3
Asset mix defines the extent of the impact
of rising interest rates and subdued
economic growth
In a similar way to the trends in asset growth,
there has been varying behaviour in the as-
set quality trends among different segments.
In June 2023, EU/EEA banks allocated 8% of
their household loans to stage 2, an increase
of 40 bps compared to June 2022. This was
driven by both an increase in consumer credit
(9.5% in June 2023 vs. 8.9% in June 2022) and
in mortgage loans (7.1% in June 2023 vs. 6.6%
in June 2022). In contrast, the share of NFC
loans in stage 2 was reduced during the same
period (12.6% in June 2023 vs. 13.8% in June
2022). CRE were the exception among NFC-
related exposures, as EU banks increased
their stage 2 allocation by 40 bps. This seg-
ment had still the highest allocation to stage
2 loans (16.7% in June 2023; Figure 26).
SME exposures have the second highest stage
2 ratio, reaching 14.1%, down from 15.6% a year
ago. SMEs are challenged by rising interest pay-
ments due to their higher usage of variable-in-
terest-rate loans (see Figure 83 on rate fixation
periods for different kinds of exposures), while
also exposed to higher input costs (e.g. energy
supply and raw materials). Demand for loans is
anyhow subdued (see Chapter 2.1). As loans are
also used for investments, such negative de-
mand trends may have a longer-term impact on
their growth as well as SMEs’ competitiveness.
This could, in turn, negatively impact their asset
quality in the future.
Figure 26:
Trend in NPL ratios (left) and share of stage 2 (right) for loans at amortised cost by
segment
Source: EBA supervisory reporting data
6%
5%
4%
3%
2%
1%
0%
Non-financial
corporations
SMEs
CRE
Large Households Mortgages
corporates
Consumer
credit
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Non-financial
corporations
SMEs
CRE
Large Households Mortgages Consumer
corporates
credit
Jun-2022
Dec-2022
Jun-2023
Jun-2022
Jun-2023
(
39
) On the year-on-year changes it needs to ne noted that
growth percentages should not be summed as the growth
rates for each stage move have by purpose and nature dif-
ferent denominators.
37
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EU RO PEAN
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A U THO R ITY
Information on the share of loans that are
past due provides an early indication of pos-
sible deterioration in the asset quality. In
June 2023, EU/EEA banks reported EUR
42bn of exposures that are past due for more
than 30 days but less than 90 days, which was
7% higher than a  year earlier. These levels
of early past-due loans were last seen during
the pandemic. Consumer credit represents
the highest ratio of loans in this category
to the total (0.89%), followed by SME loans.
These ratios followed a  rising trend since
June 2021 and, after a peak in the beginning
of this year, they slightly corrected but still
remain close to their pandemic heights (Fig-
ure 27).
Figure 27:
Share of past due more than 30 days and less than 90 days to total loans at amortised
cost by type of exposure
Source: EBA supervisory reporting data
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
Mar-2020
Mar-2021
Mar-2022
Mar-2023
Sep-2020
Dec-2020
Sep-2021
Dec-2021
Sep-2022
Dec-2022
Jun-2020
Jun-2021
Jun-2022
Jun-2023
Total
NFCs
SMEs
CRE
Households
Mortgages
Consumer credit
There is growing concern about real estate
exposures. Although mortgage NPL ratios
remain low (1.5%), prices in the RRE markets
across Europe have slowed down substan-
tially or even declined in recent quarters, as
interest rates increased at an unprecedented
pace. It followed a notable rally in RRE mar-
kets since the outset of the pandemic. There
have been major differences across countries
and regions. European authorities raised
their concerns on the possible consequences
of a  rapid price correction in RRE markets.
Such a development would not only pressure
banks’ credit quality and challenge their prof-
itability, but could create a broader effect on
economic growth, creating an adverse loop
that could feed back to banks’ credit quality.
Although risks stemming from these expo-
sures are material, there are several factors
that mitigate the impact on banks. Loan-to-
value ratios have remained stable compared
to last year (55% of mortgages had loan-to-
value (LTV) ratios of less than 60% and only
5% had LTV ratios of more than 100%), while
the share of loans in high LTV buckets de-
creased in recent years. The reduction has
been in part supported by stricter and more
prudent lending standard requirements acti-
vated or tightened in a  number of countries
(Figure 28).(
40
)
(
40
) See the list in
ESRB overview of national macropru-
dential measures.
For CRE exposures, price corrections have
gathered pace, at least in certain jurisdictions
such as Nordic countries or Germany. Vulner-
abilities for the sector started piling up during
the pandemic and these have been intensified
as higher interest rates added refinancing pres-
sures to the sector, while inflation has added to
construction costs. The sector is also confront-
ed by low demand, especially in office and retail
segments, and more structural issues such as
changes in work practices or climate transition.
At the same time as capital markets require
a  higher premium to refinance maturing debt,
banks have tightened their credit standards,
making access to funding more difficult.
Nevertheless, LTVs remain at robust levels.
64% of CRE exposures have an LTV of less than
60%. This provides some cushion for banks
in case of a  wider and deeper correction in
CRE markets. Yet, close to EUR 160bn of CRE
loans had a LTV of more than 100%. The high-
est share of “high LTV values” was reported in
central European countries (Figure 28). Broad-
based economic slowdown and tightening of
financial conditions could increase credit risk,
which could also weigh even more on these ex-
posures. Leveraged investors, including non-
bank financial intermediaries, could be forced
to sell CRE properties, adding downward pres-
sure on prices and exposing non-mitigated
risks related to a liquidity mismatch in real es-
tate investment funds.
38
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 28:
LTV shares for mortgages and CRE (left) and share of CRE with LTV >100% by country
(left)
Source: EBA supervisory reporting data
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
45%
40%
35%
30%
25%
20%
15%
Jun-22
Jun-23
Loans collateralised by
residential immovable property
Jun-22
Jun-23
Loans collateralised by
commercial immovable property
10%
5%
RO
BG
CZ
GR
IS
HU
SK
SI
HR
PL
AT
IT
PT
EE
LT
LV
NL
ES
EU
NO
DK
CY
DE
LU
FR
BE
IE
FI
SE
LI
MT
Of which: loans with LTV ratio higher than 100%
Of which: loans with LTV ratio higher than 80% and less than or equal to 100%
Of which: loans with LTV ratio higher than 60% and less than or equal to 80%
Of which: loans with LTV ratio lower than 60%
0%
Asset quality deterioration mostly evident
in specific sectors
During the first half of 2023, the credit risk of
NFCs increased. The most notable deteriora-
tion was reported in the pandemic-hit sec-
tors, such as hospitality, which may have nev-
er fully recovered from the pandemic. These
firms are now being confronted with inflation
pressures, high energy costs and lower eco-
nomic growth. In addition, the slowdown in
real estate markets has caused an increase
in the credit risk of sectors such as construc-
tion and mining. Insolvencies in these sectors
have accordingly increased markedly. For
some sectors, bankruptcies are now at their
highest level for almost a decade. Banks’ su-
pervisory data reconciles to some extent with
the market data on insolvency rates. For in-
stance, data on the hospitality sector shows
a  strongly rising bankruptcy rate and at the
same time banks reported an increase in the
NPL ratio for this sector (Figure 29). The sec-
toral analysis provided by the EBA’s EU-wide
stress test also shows that banks expect
these sectors as well as energy-intensive
sectors to be particularly vulnerable within
the context of an adverse scenario.(
41
)
Figure 29:
Bankruptcy declaration by sector – 2015 = 100
Source: Eurostat
240,
220,
200,
180,
160,
140,
120,
100,
80,
60,
40,
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Q4 2016
Q1 2017
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Q1 2023
Q2 2023
Q3 2023
Industry
Trade
Accommodation and food services
Financial, insurance, real estate activities; professional and support services
Total - Industry, construction and market services
Construction
Transportation and storage
Information and communication
Education, health and social activities
(
41
) See the results of the EBA’s 2023 EU/EEA-wide stress
test from July 2023.
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EU RO PEAN
B ANKING
A U THO R ITY
Banks recognised extra provisions towards
household exposures as they prepare for
asset quality deterioration
The overall coverage ratio for NPLs de-
creased by 90 bps over the year between
June 2022 and June 2023 to 42.9%. This was
mainly driven by a decrease in the coverage
ratio of NFC NPLs (44.5% in June 2023 vs.
46.5% in June 2022), while the coverage ra-
tio for households remained roughly stable
(42.4% in June 2023 vs. 42.5% in June 2022).
Total provisions of EU/EEA banks were down
by 3% YoY. In total, as of June 2023, EU banks
booked EUR 240bn of provisions, of which
EUR 155bn were towards NPLs (down by 5%
compared to June 2022), and close to EUR
85bn were towards performing loans, which
remained stable. The coverage ratio for per-
forming loans remained stable at 0.44%.
Banks’ expectation for faster deterioration of
asset quality in household loans is confirmed
also by provisioning against performing
household loans. Banks increased their pro-
visions against mortgages by 8% over the last
year, while during the last quarter they also
accelerated provisioning against performing
consumer credit. In total, banks increased by
7% their provisions for household loans. At
the same time, provisions against perform-
ing NFC loans decreased by 5%, while their
provisions increased only against CRE expo-
sures. The dichotomy is essentially driven by
the higher reallocation of household loans
from stage 1 to stage 2 compared to NFCs
(Figure 30).
Figure 30:
EU accumulated impairments on performing loans by segment (June 2022 = 100)
Source: EBA supervisory reporting data
115
110
105
100
95
90
Jun-2022
NFCs
SMEs
Sep-2022
CRE
Dec-2022
Large corporates
Households
Mar-2023
Mortgages
Jun-2023
Consumer credit
The majority of countries have increased
their provisions against performing loans
significantly, with some countries increas-
ing by more than 20%. There are, however,
exceptions that are mostly attributable to de-
creasing overall exposures. The biggest in-
creases in provisions were reported by cen-
tral European banks (Figure 31).
40
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2818821_0043.png
R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 31:
Year-on-year % change in provisions by country and by status of loan– June 2023
Source: EBA supervisory reporting data
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
MT NL BE GR IT IS ES NO CY LI EU FR SI FI HR DE EE PT IE HU LU AT RO BG DK CZ PL LV SK SE
Provisions on performing loans
Provisions on NPLs
Total provisions
in place, according to RAQ results. These re-
sults also show that for more than 30% of the
banks the share of overlays in total expected
credit losses (ECLs) is above 0% and up to
10%, for another 34% between 10% and 30%.
For slightly more than 20% of the banks the
share of overlays in total ECLs even stands
at 30% or more. The scope of these overlays
has changed over time. Currently, the major-
ity of these overlays are related to the impact
of inflation on credit risk, while previously
these were connected to the Russian war or
the pandemic. Nevertheless, these overlays
presumably cushion the need for additional
provisions going forward (Figure 32).
The cost of risk (CoR) stood at 0.45%, un-
changed during the last year. This is the
lowest point since respective data has been
available, and almost half of the reported
levels during the pandemic. According to the
results of the autumn 2023 RAQ, more than
70% of the banks expected CoR to be less
than 50 bps, with only some banks expecting
CoR to be larger than 100 bps. The expec-
tation for low CoR contrasts with the broad
assumption of asset quality deterioration
(Figure 33). This could be explained by the
presence of management overlays that banks
have kept in their books since the pandemic.
Around 90% of the banks have such overlays
Figure 32:
Banks’ expectations on cost of risk (top) and share of ECLs that is recognised via
provision overlays (bottom)
Source: EBA Risk Assessment Questionnaire
50%
53%
47%
42%
23% 20%
28% 25%
15%
2% 2%
Sep-2022
Sep-2023
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2022
Sep-2022
Mar-2023
50
40
30
20
10
0
13% 14%
16%
8% 8% 7%
2% 3% 3%
Sep-2023
Mar-2022
Sep-2022
7% 6%
1% 1%
Mar-2023
Sep-2023
Mar-2023
Sep-2023
a) < 0bp
b) 0 and < 25bp
c) 25 and < 50bp
d) 50 and < 75bp
e) 75 and < 100bp
f) 100 and < 200bp
g) 200bp
41
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A U THO R ITY
a) 0%
b) 0% and < 10%
c) 10% and < 20%
d) 20% and < 30%
e) 30% and < 40%
f) 40%
0
5
10
15
20
25
30
Banks’ expectations on asset quality
continue to worsen
According to the results of the autumn 2023
RAQ, an increasing number of banks expect
broad asset quality deterioration in the fol-
lowing 12 months. Banks expect asset quality
to mainly deteriorate in the consumer credit,
SME and CRE segments (more than 60%),
while a constantly increasing share of banks
expect asset quality to also deteriorate for
RRE-related exposures. Credit exposures
prone to cyclical fluctuations, such as con-
sumer credit or other unsecured debt, could
be more vulnerable to downside risks. Yet un-
employment, which is a major driver for the
performance of these exposures, is at least
stable in the EU. As macroeconomic uncer-
tainty remains elevated, impacting consum-
er confidence and perhaps unemployment
rates, asset quality could deteriorate rapidly
in these segments (Figure 33).
Figure 33:
Banks’ expectations on possible deterioration in asset quality in the next 12 months
by segment
Source: EBA Risk Assessment Questionnaire
71%
58%
43%
40%
32%
37%
31%
61%
53%
42%
32%
25%
15%
20%
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Mar-2022
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
67%
60% 56%
65%
59%
49%
69%
63%
52%
60%
71%
53%
43%
52%
34%
24%
32%
26%
20%
a) CRE
b) SME
c) Residential mortgage
d) Consumer credit
e) Large corporates
42
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Further increasing interest rates or rates
staying higher for a long period, slower eco-
nomic growth and inflation stickiness could
aggravate downside risks for credit quality.
Banks should remain vigilant and acknowl-
edge the looming economic and other risks
in their credit risk assessments. This is al-
ready reflected in the EBA’s 2023 EU-wide
supervisory examination programme, which
provided clear directions for supervisory
scrutiny, in particular related to borrowers’
repayment capacity, the early detection of
debtors and exposures in distress, adequate
provisioning policies and timely recognition
of loan losses as well as proactive applica-
tion of forbearance or other measures. The
2024 programme continues to emphasise the
general expectation of close monitoring of
banks’ asset quality.(
42
)
Various targeted support measures have
been put in place in a rising number of coun-
tries to alleviate the impact of abruptly in-
creased interest rates, mainly on vulnerable
mortgage borrowers; downside risks remain
elevated. As during the pandemic, there has
been a  rising number of countries applying
moratoria and similar measures to address
the impact from rising rates or elevated in-
flation. Such moratoria can be based on laws
or can be initiatives of banking associations
or the like. They include, for instance, caps
on interest payments, payment holidays,
suspension of penalty fees that should origi-
nally be paid if a loan is in arrears, and simi-
lar measures. In all cases where any form of
forbearance is applied, banks need to apply
proper credit risk assessment for respective
borrowers and address any credit risk dete-
rioration proactively. Banks should examine
on a  case-by-case basis the forbearance
measures that are most suitable for each
borrower.
(
42
) See the EBA’s examination programme priorities for
prudential supervisors for 2023 and the
examination pro-
gramme priorities for prudential supervisors for 2024.
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2818821_0046.png
EU RO PEAN
B ANKING
A U THO R ITY
3. Liability side: funding and
liquidity
3.1.
Funding
From September 2019 until December 2021,
when the programme ended, euro area
banks took up a  total of EUR 2,339bn of TL-
TRO-3 funds with durations of three years.
The largest share of TLTRO-3 funds was al-
lotted in 2020 and has matured in 2023. In the
first half of 2023, over EUR 1.4tn of TLTRO-3
matured.(
44
) With high maturing volumes
of TLTRO, banks’ reliance on public sector
sources of funding strongly decreased in
2023, and is expected to decrease further in
2024.
The large majority of euro area banks were in
a  position to comfortably repay or refinance
their exposure to maturing TLTRO until Q3
2023. They often used their strong liquidity
positions, with ample holdings of cash and
high cash balances at the ECB, to repay parts
of maturing TLTRO-3 amounts. Increased
net issuance of debt instruments, in par-
ticular of covered bonds, was another way
to repay this maturing central bank funding.
For most banks exposed to TLTRO-3, cash
balances they held at the ECB were above
remaining outstanding TLTRO-3 amounts
before maturity dates in 2023. Next to repay-
ing maturing TLTRO-3, less favourable con-
ditions for TLTRO-3 funding applicable since
November  2022 reduced interest earning
opportunities and might have implied early
repayments before maturity dates. Early re-
payments were not least facilitated through
additional windows for prepayments the ECB
introduced.
The decreasing share of central bank funding
on balance sheets is reflected in banks’ fi-
nancial liability composition. Other liabilities,
which include deposits from central banks,
strongly decreased to 15.9% in the first half of
2023, from 18.5% at the end of 2022. They are
below the 16.8% reported in December 2019,
when improved TLTRO-3 conditions were in-
troduced (Figure 34).
A long-term trend of a  focus on customer
deposits, as observed in past editions of the
RAR, changed in 2023. After steadily grow-
ing customer deposit volumes over the past
years, the volume growth slowed down ma-
terially in 2023. Central bank funding has
become a  less important source of funding
as in previous years, as banks started to re-
pay large amounts of long-term central bank
funding they obtained. Concerning market-
based funding, the share of debt securities
issued in bank balance sheets increased
in 2023. Issuance volume of market-based
funding instruments was high, with a  grow-
ing focus on senior unsecured instruments.
The covered bond issuance volume increased
as well. Issuance of market-based funding
instruments increased in volume in spite of
rising costs for debt securities in the rising
interest rate environment, and overall more
challenging market conditions amid in-
creased volatility. The share of deposits from
other credit institutions also increased.
Strongly decreasing use of central bank
funding
The importance and volume of central bank
funding, including long-term funding, for
banks increased significantly during the pan-
demic. These funding facilities that central
banks provided since the pandemic were an
important factor in supporting market con-
fidence in EU/EEA banks. In the euro area,
favourable conditions of the TLTRO-3 long-
term funding programme the ECB ran from
2019 to 2021, with opportunities to reduce
funding costs at rates below market rates,
made it favourable for banks to participate.
The programme also provided interest earn-
ing opportunities for participating banks,
although these were reduced when the ECB
started its monetary tightening and it decided
to apply the average applicable key ECB in-
terest rates.(
43
)
(
43
) See
ECB recalibrates targeted lending operations to
help restore price stability over the medium term,
October
2022.
(
44
) Based on ECB data. ECB data does not reflect early
repayments.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 34:
Breakdown of financial liabilities composition by country, June 2023
Source: EBA supervisory reporting data
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
In spite of large maturing volumes, over EUR
630bn of TLTRO-3 funding remains on euro
area banks’ balance sheets at the end of Q3
2023, that should be added to the amounts of
attained Major Refinancing Operation (MRO)
funding. This exposure, as well as some in-
creased usage of MRO since the TLTRO-3
Figure 35:
ECB lending to the euro area via monetary policy operations, with a focus on LTRO
(EUR bn)(
45
)
Source: ECB
2,500
2,000
1,500
1,000
500
0
May-2022
May-2023
Mar-2022
Mar-2023
Dec-2022
Sep-2022
Sep-2023
Aug-2022
Nov-2022
Aug-2023
Feb-2022
Feb-2023
Jun-2022
Jun-2023
Jan-2022
Jan-2023
Oct-2022
Apr-2022
Apr-2023
Jul-2022
Jul-2023
Central bank funding continues to support
banks as it comes at low cost, while market-
based funding costs have strongly increased
amid rising interest rates. In particular, it sup-
ports those banks that may face challenges
to obtain market-based funding at reasona-
ble prices especially in a volatile market envi-
ronment or because of weaker and uncertain
market perceptions. However, central bank
funding cannot offer an appropriate and last-
ing alternative to debt securities issuance or
other forms of stable funding, not least since
durations of central bank funding usually are
short or medium term. EU/EEA banks’ fund-
ing plans indicate expectations for a  high
(
45
) LTRO includes TLTRO-3.
SI
MT
LT
PL
PT
CY
HR
BG
GR
LV
RO
SK
CZ
HU
NL
LI
AT
EE
ES
IT
BE
IE
IS
EU/EEA
FR
FI
NO
SE
DE
LU
DK
Customer deposits from households
Deposits from credit institutions
Debt securities issued
Other customer deposits
Customer deposits from NFCs
Other liabilities
programme ended, underlines the contin-
ued relevance of central bank funding in
banks’ funding structures. In comparison,
the usage of ECB funding facilities reached
a high of EUR 900bn in the GFC, and approx.
EUR  1.25tn in the sovereign debt crisis of
2011/12.
Lending to euro area (MPO)
LTRO
net positive issuance volume on short-term
and long-term unsecured and secured debt
instruments in 2023 and 2024.(
46
) This may
indicate plans to continue to repay some of
remaining maturing TLTRO-3 funding by is-
suing more debt instruments, next to using
cash balances. Such plans are in line with
responses to the RAQ (spring  2023 edition),
where using excess liquidity is indicated to be
the most common intended action to repay
maturing TLTRO funding, followed by cov-
ered bond issuance.(
47
)
(
46
) See the
EBA’s report on funding plans,
July 2023.
(
47
) See the
EBA’s RAQ booklet, spring 2023.
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EU RO PEAN
B ANKING
A U THO R ITY
Asset encumbrance declined with reduced
central bank funding
In line with decreasing reliance on central
bank funding, encumbrance of assets has
decreased markedly. The overall asset en-
cumbrance ratio decreased from 28.6% in
June 2022 to 25.7% in June 2023 (29.2% in
December 2019). The decrease was mainly
numerator-driven, by a  strongly decreasing
volume of encumbered assets and collateral.
While maturing central bank funding was an
important driver of a declining encumbrance
ratio, this decline was partly offset by higher
covered bond issuance.
Until the beginning of 2022, high usage of
central bank facilities was an important
driver of high encumbrance of assets, and
central bank funding was the main source
of asset encumbrance. More than half of
central bank eligible assets and collateral
were encumbered in June 2022 (51.8%), af-
ter a  strong increase during the pandemic.
Since December 2022, as a result of strongly
reduced central bank funding, covered bonds
and repurchase agreements as traditional
sources of encumbrance have become the
major source of encumbrance, followed by
central bank funding.(
48
)
Lower encumbrance levels provide an ad-
ditional buffer for EU/EEA banks to access
funding at a  pricing below unsecured mar-
ket funding, not least in a  volatile market
environment and amid an increased cost of
funding. Lower encumbrance ratios also al-
leviate some risks for unsecured creditors as
encumbrance subordinates them. Bank mar-
ket turmoil in March 2023, when wholesale
funding markets were temporarily not ac-
cessible, has demonstrated the importance
of a  sustainable funding mix and stable and
secure access to funding. The overall in-
creased availability of unencumbered assets
also limits potential downside risks of an ad-
verse feedback loop in a potential situation of
liquidity constraints.
Deposit volume growth slowed down
Deposit volumes continued to slightly in-
crease in 2023. Yet the long-term trend of
strongly growing deposit volumes slowed
significantly, with deposit growth of 4.2% in
2022. Volume growth slowed down to 1.1%
between June 2022 and June 2023, and to
0.8% in the first half of this year. The share
of deposits from NFCs in total financial lia-
bilities slightly increased from 15.7% in June
2022 to 16.2% in June 2023, while the volume
(
48
) See the
EBA 2023 report on asset encumbrance
from
July 2023.
only increased marginally by 0.1% (Figure 34).
Household deposits increased by 1.7%, and
the ratio to total liabilities increased from
28.9% to 30.3% between June 2022 and June
2023. Banking turmoil related volatility, in
which fast outflows of high deposit volumes
led to the failure of some medium-sized US
banks, did not have any major impact on de-
posits held at EU/EEA banks. Yet the episode
showed that deposits have become more vol-
atile in digitalised banking, and close moni-
toring of deposit flows is warranted.
The uncertain macroeconomic environment
with high inflationary pressures and increas-
ing policy interest rates have affected de-
posit growth dynamics. After strong deposit
growth during the pandemic, the slowing may
be attributable to households partly resort-
ing to deposits for their spending in the in-
flationary environment amid decreasing real
incomes and purchasing power, but also to
moves into other means of investments. High
consumer spending amid pent-up demand
during the pandemic may also still affect
deposit volumes. Moreover, the increasing
cost of lending in the high interest rate en-
vironment further incentivises the use of de-
posits for households and NFCs rather than
taking up new lending, or the use of amounts
saved in deposits to repay the lending. Nor
did the rather low elasticity of deposit rates
in response to rising policy interest rates, in
particular for sight deposits, offer strong in-
centives for clients to deposit higher volumes
(see box on deposit betas in Chapter 5). Con-
tinued high volumes of NFC deposits never-
theless show that corporates aim to maintain
solid liquidity positions amid high uncertain-
ties about the economic environment and the
further path of interest rates.
Deposit rates only increased slowly in the
euro area since repeated policy rate rises
started in July 2022. The cumulative increase
of average deposit rates has on average been
substantially less than the cumulative in-
crease in the ECB deposit rate facility. The
elasticity of deposit rates in response to the
ECB deposit rate facility in the ongoing mon-
etary policy tightening cycle is also estimated
to be lower than in previous periods of ECB
rate rises. For NFC deposits, the deposit rate
increase was nevertheless faster in 2023
than for household deposits. The price elas-
ticity of euro area deposit rates also varies
across countries and is estimated to be lower
than in the current policy interest rate ris-
ing cycle in the US and UK. Negative deposit
rates, which became more widespread until
the first half of 2022 amid negative policy
interest rates, were widely abolished since
negative policy rates ended (Figure 36).
46
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 36:
Euro area average deposit rates, overnight and with maturities above one year; new
business, households and NFCs (%)
Source: ECB
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
Jul-2022
Apr-2022
Jan-2022
Oct-2022
Feb-2022
Jun-2022
Jan-2023
Feb-2023
Apr-2023
Aug-2022
Nov-2022
Jun-2023
Jul-2023
22%
5%
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2022
Dec-2022
Sep-2022
May-2022
Mar-2023
Overnight - NFCs
Overnight - HHs
1y plus - NFCs
1y plus - HHs
Strong focus on deposits going forward
On plans for future funding mixes, responses
to the RAQ suggest that the share of banks
intending to focus on deposits going forward
has increased strongly compared to past it-
erations of the RAQ. With 47% of respondents
agreeing to attract more retail deposits, de-
posit funding is the most popular source of
funding banks intend to attract in the next
12 months, ahead of intentions to attract un-
secured funding (Figure  37). The latter had
been the most attractive source of funding
in previous RAQ editions. Next to a  planned
strong focus on retail deposit funding, the
share of banks with plans to focus on whole-
sale deposits has strongly increased as well,
with 24% of respondents agreeing. Further-
more, 75% of respondents intend to increase
household deposit rates, and 76% plan to
increase deposit rates for NFCs. This would
lead to increasing deposit funding costs and
affect banks’ NII and as such profitability, giv-
en the high share of deposits in funding mix-
es. Plans to focus on deposit funding while
overall deposit growth is slowing down also
raises questions about the feasibility of such
plans, and about further upward pressure on
deposit pricing. EU/EEA banks’ funding plans
confirm plans to further increase deposit vol-
umes, with plans to grow deposits by 2.8% in
2023, and by 3.5% in 2024.(
49
) Yet funding plan
data was submitted in Q1 2023, and might no
longer fully reflect banks’ plans in late 2023.
Figure 37:
Funding instruments banks intend to focus on in the next 12 months
Source: EBA Risk Assessment Questionnaire
52%
42%
43%
37%
38%
54% 53% 53%
45% 49%
40%
38%
47%
38%
36%
24%
20%
10% 8%
13%
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
50%
40%
30%
20%
10%
0%
25% 35%
25%
31%
22%
19%
24%
18% 22%
5%
May-2023
34%
18%
20% 20%
5%
2%
19%
7%
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
Mar-2023
Sep-2023
Mar-2021
Sep-2021
Mar-2022
Sep-2022
a) Preferred senior unsecured b) Senior non-preferred /
Senior HoldCo
c) Subordinated debt
including AT1/T2
d) Secured
(covered bonds)
f) Wholesale deposits
g) Retail deposits
(
49
) See the EBA 2023 report on funding plans from
July 2023.
Mar-2021
Sep-2021
Mar-2022
Sep-2022
h) Central bank
funding
Aug-2023
47
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EU RO PEAN
B ANKING
A U THO R ITY
A no longer increasing volume of loans to
households and NFCs (see Chapter 2.1), and
slower growth of deposit volumes resulted
in a  relatively stable loan-to-deposit ratio.
It stood at 109.2% in June 2023, and at the
same level as in June 2022, after a long-term
declining trend of the past years (Figure 38).
Growing deposit volumes until 2022 support-
ed banks to maintain strong lending. Going
forward, no longer growing deposit volumes
may have an impact on banks’ capacity to
increase lending in support of the economy,
especially when lending demand might in-
crease again (see Chapter 2.1).
Figure 38:
Loan-to-deposit ratio (weighted average) and loan-to-deposit ratio dynamics (trends
in numerator and denominator; December 2014 = 100), over time
Source: EBA supervisory reporting data
160
150
140
130
120
110
100
90
Dec-2014
Mar-2015
Jun-2015
Sep-2015
Dec-2015
Mar-2016
Jun-2016
Sep-2016
Dec -20 16
Mar-2017
Jun-2017
Sep-2017
Dec-2017
Mar-2018
Jun-2018
Sep-2018
Dec-2018
Mar-2019
Jun-2019
Sep-2019
Dec-2019
Mar-2020
Jun-2020
Sep-2020
Dec-2020
Mar-2021
Jun-2021
Sep-2021
Dez-2021
Mar-2022
Jun-2022
Sep-2022
Dec-2022
Mar-2023
Jun-2023
Numerator: loans to households and NFCs
Loans to deposits ratio (weighted average, RHS)
Spread and pricing trends: heightened
market volatility and temporary challenges
A period of high volatility since the begin-
ning of the Russian war of aggression against
Ukraine in February 2022 and amid beginning
monetary tightening ended in October 2022.
This period was characterised by both strongly
widening and contracting spreads and high
fluctuations. Since then, spreads tightened
gradually and substantially until early March
2023, when market conditions were overall
supportive for market funding amid an outlook
of lower inflation and improving earnings per-
spectives of banks amid rising interest rates
(see Chapter 1).
The market situation changed suddenly in early
March 2023 with the failure of some medium-
sized banks in the US and of CS in Switzerland.
This was accompanied by temporarily worsen-
ing market perceptions for the banking system,
and especially for unsecured bank debt instru-
ments. Market volatility spiked and spreads
for unsecured market instruments widened
substantially to levels last observed in October
2022 (Figure  39). Bank funding markets were
temporarily not accessible, and primary se-
cured and unsecured issuance activity came
to a  halt. Meaningful issuance activity of un-
secured instruments commenced again after
two weeks. The situation improved since April
and volatility returned to rather low levels as
observed at the beginning of the year, with
spreads gradually tightening again until Sep-
tember 2023. Additional bouts of higher market
Denominator: deposits from households and NFCs
volatility were observed after the March bank-
ing turmoil, although financial markets were
less volatile overall than in the March 2023
episode and for most of 2022. Slightly widening
spreads were observed since September, often
driven by rising sovereign yields. Spreads for
market funding instruments remained wider in
Q3 2023 than before the bank failures of March
2023. Bank funding markets in 2023 continued
to be susceptible to adverse news, such as po-
litical events and adverse economic news, es-
pecially to news related to inflation as well as
energy and commodity prices, as it is reflected
in spread indices (Figure 7).
The spreads of the main types of debt instru-
ments showed a diverging trend in 2023. While
covered bond spreads broadly remained stable
during the year, unsecured spreads were more
volatile, with a  spike of volatility amid bank
sector turbulence in early March 2023. Where-
as spreads for SNP instruments decreased by
the end of September compared to the begin-
ning of the year, spreads for Tier 2 and AT1
were higher than in the beginning of the year
(Figure  39). The latter instrument types were
particularly affected by bank market turmoil in
March when investor concerns about loss ab-
sorption of instruments lowest ranked in the
capital stack mounted (see the textbox on the
AT1 market during and after the March bank-
ing turmoil in Chapter 4). These concerns were
also an important factor for a near standstill in
issuance activity of Tier 2 and AT1 instruments
after the turmoil until July 2023, and for their
heightened pricing since then.
135%
125%
115%
105%
95%
85%
75%
48
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2818821_0051.png
R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 39:
Cash spreads of banks’ debt and capital instruments (in bps)
Source: IHS Markit (
50
)
350
300
250
200
150
100
50
0
Dec-2022
Mar-2023
Apr-2023
May-2023
Aug-2023
Jan-2023
Feb-2023
Jun-2023
Jul-2023
1,200
1,000
800
600
400
200
0
Sep-2023
Sep-2023
Aug-2023
AT1
Covered bonds
Senior preferred
Senior bail-in
Tier 2
AT1 (rhs)
Uncertainty about the further course of mon-
etary policy tightening additionally contrib-
uted to substantial interest rate volatility.
Volatility was highest in short-term interest
rates, in particular at times of heightened
market uncertainty about inflation and the
further course of monetary tightening. After
having been at negative rates for a long time,
EURIBOR rates of all durations turned posi-
tive in August 2022, and strongly increased
further since then in line with policy interest
rate rises. Amid strongly increasing inter-
est rates across durations, the interest rate
differential between ESTR one-day rates
and EURIBOR rates for up to 12 months de-
creased gradually in line with the perception
of reduced uncertainty to an extent on the
future course of policy rates and on inflation
expectations, and was very limited only by
October 2023 (Figure 5).
EURIBOR rates are an important pricing in-
dicator for other interest-rate-related prod-
ucts, and their high volatility was not least re-
flected in high price volatility of bank funding
instruments. Moreover, yields for all types
of funding instruments increased in 2023,
in line with increasing policy interest rates.
High volatility was also an important factor
for temporarily strongly reduced debt instru-
ment issuance volumes, when adequate pric-
ing levels were difficult to identify for both is-
suers and investors and demand was low.
Figure 40:
Absolute yields of banks’ debt and capital instruments (in %)
Source: IHS Markit
15
12
9
6
3
Dec-2022
Feb-2023
Apr-2023
May-2023
Jun-2023
Jan-2023
Mar-2023
Jul-2023
Tier 2
0
Covered bonds
Senior preferred
Senior bail-in
(
50
) With regard to IHS Markit in this chart and any further
references to it in this report and related products, neither
Markit Group Limited (“Markit”) nor its Affiliates nor any
third-party data provider make(s) any warranty, express
or implied, as to the accuracy, completeness or timeliness
of the data contained herewith nor as to the results to be
obtained by recipients of the data. Neither Markit nor its
Affiliates nor any data provider shall in any way be liable
to any recipient of the data for any inaccuracies, errors or
omissions in the Markit data, regardless of cause, or for any
damages (whether direct or indirect) resulting therefrom.
49
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Spreads for bank funding instruments are
widely expected to remain heightened amid high
uncertainties about the further path of infla-
tion and the speed of projected disinflation, and
a  subdued economic outlook. Pricing for debt
instruments and volatility of interest rates are
also expected to remain elevated while mon-
etary policy stances remain tight. This may pose
some challenges in attaining market-based
bank funding at reasonable pricing at all times,
not least for banks with weaker fundamentals or
market perceptions. Such banks may not least
face challenges in finding periods of less vola-
tility and windows of opportunity to issue when
pricing is most attractive.
High volume of instruments issued in spite
of volatile markets and increased total
pricing
In spite of rather volatile interest rates and sub-
stantially increased total pricing and absolute
yields for funding instruments, banks never-
theless made use of longer episodes of calmer
markets and spread tightening in 2023 than in
the previous year to issue higher volumes of un-
secured debt in 2023 compared to 2022.
Primary funding market activity was very high
in the beginning of 2023 when banks made use
of a temporary period of decreasing spreads to
issue high volumes of unsecured debt instru-
ments and speed up their funding plans for the
year. Market conditions materially deteriorat-
ed and primary activity came to a  temporary
halt with bank market turmoil in March. While
meaningful debt issuance activity of secured
and senior unsecured instruments resumed
soon thereafter, it took much longer for issu-
ance activity of subordinated instruments, in
particular Tier 2 and AT1, to resume.
Since April, issuance of unsecured instru-
ments continued at an overall high level, in
spite of higher spreads than before March for
most instrument types since then. Since July,
meaningful issuance activity of Tier 2 and AT1
instruments also resumed (see also box on AT1
markets following the March banking turmoil
in Chapter 4). The aggregate issuance volume
of unsecured debt instruments was higher in
the first nine months of 2023 than at the same
time in 2022 (Figure 40). Issuance activity was
rather unevenly distributed across the year, as
already observed in 2022, with high issuance
activity in times of temporarily less volatil-
ity and contracting spreads, and low issuance
activity in periods of volatile interest rates and
wide spreads. Episodes with benign conditions
and higher primary activity were nevertheless
longer in 2023 than last year.
Higher unsecured debt issuance volume in
the first nine months of 2023 was reported
for all major types of unsecured and subor-
dinated debt instruments. Issuance volume
was in particular higher for issuances of pre-
ferred senior unsecured debt and senior debt
eligible for MREL, such as senior debt from
HoldCos and SNP debt. Issuance volume of
subordinated instruments, in particular of T2
and AT1 capital instruments, also increased
in 2023, in spite of a prolonged period – in the
case of AT1s of more than three months (see
textbox in Chapter 4 on AT1 markets after the
CS AT1 bonds write-down) – of almost no is-
suance of such instruments after the bank
market turmoil in March 2023. Issuance ac-
tivity of SNP instruments was high in 2023,
not least driven by the need to meet MREL
requirements by January 2024, while offer-
ing price advantages for issuing banks com-
pared to T2 and AT1 instruments (Figure 41).
Figure 41:
Issuance volumes of EU/EEA banks’ debt and capital instruments, Q1 – Q3
2021 — 2023 (in EUR bn)(
51
)
Source: Dealogic, EBA calculations
180
160
140
120
100
80
60
40
20
-
Covered bonds
Senior preferred
NPS & HoldCos
2021
2022
T2
2023
AT1
(
51
) Based on publicly available market data which may
not completely reflect all issuances of the different types of
debt and capital instruments.
50
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
The vast majority of banks have been able
to comfortably issue unsecured debt since
markets calmed down again after the bank
market turmoil in March 2023. Generally,
large and medium-sized banks have been
able to issue instruments across the capi-
tal stack in 2023. Some challenges in issu-
ing subordinated and loss-absorbing instru-
ments ranked lowest in the capital stack,
such as AT1 bonds, at reasonable pricing
nevertheless persist for some smaller banks
and those with heightened risk perceptions
across the EU/EEA. Challenges are not least
aggravated by concerns about investor re-
ception. Based on market intelligence there
are also indications that banks across the
board had to offer higher premia at issuance
in 2023 than in the past. Going forward, some
challenges in issuing subordinated and loss-
absorbing instruments are expected to con-
tinue, given heightened volatility and slightly
increased pricing since Q3 2023. Continued
high interest rates and spread volatility for
instruments across the capital ladder, but
especially for debt ranked low in the capital
stack, may pose additional challenges.
Plans for lower volumes of unsecured and
subordinated debt funding
Responses to the RAQ indicate bank plans
for a lesser focus on unsecured funding ac-
tivities than observed in 2023. Although the
share of banks planning to focus on preferred
senior unsecured funding and SNP funding
remains high (38% agreement each), there
is no longer a  majority of banks with such
plans, as observed in the autumn 2022 RAQ.
Attaining subordinated debt instruments,
including AT1 and T2 capital instruments, is
expected to further decrease in relevance in
the next 12 months, with only 13% agreement
to attain more subordinated funding (Fig-
ure 37). Instead of a focus on unsecured and
subordinated instruments, RAQ responses
rather indicate a  strongly increasing focus
on deposits (see above), and also on covered
bonds. A  decreasing focus on SNP funding
and on subordinated instruments, including
AT1 and Tier 2 capital instruments, could be
explained by the requirement for banks to
meet their MREL targets by 2024 (transition
periods can impact the final date), with fewer
incentives to further optimise capital struc-
tures for banks which have already met their
targets, and to issue or to roll over higher vol-
umes of such instruments.
Bank funding plans confirm a decreasing fo-
cus on SNP instruments in 2024 compared to
2023. As regards preferred senior unsecured
funding, funding plans indicate expectations
of an increasing volume in 2024, which is
contrary to expectations expressed in the
RAQ. The volume of unsecured instruments
issued from holding companies as well as
of AT1 instruments is expected to broadly
remain at the same volume in 2024 as this
year, according to the funding plans. Yet the
plans suggest an increasing volume of Tier 2
instruments in 2024.(
52
)
Almost half of respondents to the RAQ ex-
pect pricing for all types of unsecured instru-
ments across the capital ladder to broadly
remain stable next year. In addition, a much
larger share expects pricing for such instru-
ments to decrease in the next 12 months than
to increase, indicating majority expectations
that interest rates, but also spreads, will not
increase further.
High volumes of covered bond issuance
The issuance volume of covered bonds in the
first three quarters of 2023 was substantially
higher than in the same period in 2022. The
trend of increased issuance volume, already
observed last year, continued. Several fac-
tors might explain the high covered bond is-
suance volume in 2023, such as the volume
of maturing bonds. Many issuing banks also
benefitted from opportunities to attain fund-
ing at lower costs than via unsecured funding
in a  volatile market environment. They also
benefitted from inherent higher security for
investors. Covered bonds especially gained
relevance for bank funding when participat-
ing banks needed to replace large volumes
of long-term central bank funding (TLTRO-3)
maturing in 2023. Further TLTRO-3 maturi-
ties in 2024 are expected to support covered
bond issuance volumes.
Going forward, prospects are for continued
high covered bond issuance volumes. The
share of respondents to the RAQ intending
to attain more covered bonds in the next 12
months slightly increased to 36% (35% in
autumn last year), although expectations
are that covered bonds may become a  less
relevant funding focus than attracting retail
deposits. Also banks’ funding plans indicate
high expected covered bond issuance vol-
umes in 2024 and beyond. Higher expected
issuance volumes may partly be driven by the
high volume of maturing covered bonds in the
next two years.
Attaining required amounts of MREL ahead
of the target date
In the EU, banks with a  resolution strategy
other than liquidation represent about 80% of
(
52
) See the
EBA 2023 report on funding plans
from
July 2023.
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total banking sector assets. Resolution strat-
egies entail an MREL above minimum capital
requirements requiring banks to build loss-
absorbing capacity, with additional funding
needs of eligible instruments. Requirements
to build loss-absorbing capacity have been
an important driver for increased issuance
volumes of in particular SNP instruments or
senior unsecured debt issued from holding
companies.(
53
)
As of March 2023, the large majority of
banks had attained their required amounts
of MREL-eligible instruments. On average,
MREL-eligible resources including own funds
reached 33.2% of RWA for Global Systemi-
cally Important Institutions (G-SIIs), 35.6%
of RWA for Other Systemically Important
Institutions (O-SIIs) and 26.2% of RWA for
other banks, of which 28.2%, 27.7%, 20.1%
of RWA subordinated. But some banks still
need to close shortfalls of required eligi-
ble amounts. The EBA estimates that out of
236 resolution groups included in its MREL
monitoring, 57 banks, representing 13% of
the sample in terms of total assets, are not
yet reaching their target, resulting in an ex-
ternal MREL shortfall plus CBR of approxi-
mately EUR 29.2bn(
54
). Of this, EUR 13.8bn
among 38 banks is due by 1 January 2024,
EUR 15.4bn among 19 banks is due after 1
January 2024. Overall, the shortfall appears
marginal at 0.4% of RWA of the sample but
can remain non-negligible in some Member
States, reaching up to 8% – albeit somewhat
supported by longer transitional periods.
(
53
) Structurally subordinated debt issued via a clean hold-
ing company.
(
54
) See the
EBA MREL Dashboard Q1 2023.
From the resolution groups included in the
monitoring, the majority of the shortfall re-
lates to smaller banks that are neither G-SIIs
nor O-SIIs (34 banks) and the rest with O-SIIs
(seven banks). G-SIIs no longer report MREL
shortfalls since 2022.
On top of the outstanding shortfall, banks in
the sample reported EUR 167bn of MREL in-
struments becoming ineligible one year from
March 2023 for falling below the one-year
remaining maturity criteria. EUR 63.2bn re-
lates to G-SIIs, EUR 88.1bn to O-SIIs and EUR
15.4bn to other banks. EUR 59bn relates to
SNP or senior Holdco instruments, EUR 88bn
relates to senior debt. EUR 20bn relates to
other MREL-eligible instruments.
Significant issuance activity of instruments
eligible for MREL has taken place after the
March banking turmoil, and it is expected
that shortfalls of eligible amounts have fur-
ther reduced since then. Looking at instru-
ment types that banks plan to issue to main-
tain their MREL targets, or to meet their
targets, responses to the RAQ show that
a large majority of respondents (78%) intend
to focus on issuing SNP instruments and
senior unsecured debt issued from holding
companies to meet or maintain their MREL
targets. 54% intend to issue senior preferred
instruments, while only 18% have plans to is-
sue subordinated instruments, including Tier
2 and AT1 instruments. The preference for
SNP and senior unsecured instruments can
be explained by the price advantage these
instruments offer compared to subordinated
instruments, while nevertheless being eligi-
ble for loss-absorbing amounts.
Box 4: State of play of EU/EEA banks’
MREL funding and resolution planning
As of May 2023, external MREL require-
ments expressed as a share of RWA were
23.3% for G-SIIs, 22.8% for O-SIIs and
21.2% for other banks. MREL is calibrated
on the basis of institutions’ own funds re-
quirements and as such it varies in line
with those. In addition, the combined buffer
requirement sits on top of MREL expressed
in terms of RWA, reaching an average of
4.1%, 4.0% and 3.5% respectively for G-
SIIs, O-SIIs and other banks.(
55
)
MREL is calibrated for a bail-in strategy for
the vast majority of banks in terms of total
(
55
) Under Commission Implementing Regulation
2021/622, resolution authorities are required to report by
the end of May the MREL decisions in force as of 1 May.
assets. Overall, the EBA finds that MREL
decisions for banks with a bail-in strategy
cover 95% of the RWA of the sample of in-
stitutions for which the MREL decision
has been above own funds requirements,
but 68% in number of banks. This reflects
the fact that transfer strategies are pre-
ferred for smaller banks. Average MREL
for banks with a  bail-in strategy is 22.9%
of RWA and 19.2% of RWA for banks with
a transfer strategy.
MREL-eligible deposits can reach up to 7%
of RWA for the smallest banks. Deposits
of large corporate clients with a  maturity
over a  year are eligible under BRRD. This
is particularly the case for resolution en-
tities that are neither G-SIIs nor O-SIIs, in
particular those with total assets below
EUR 50bn.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
As of May 2023, the EBA has received
MREL decisions for 307 resolution entities
and 184 non-resolution entities (internal
MREL). Resolution authorities are required
to report their MREL decisions to the EBA
in May of every year. Overall, resolution
banks represent around 80% EU total as-
sets. Internal MREL ensures that external-
ly issued resources of the resolution entity
are down-streamed to the most relevant
entities within a  resolution group so as to
support the execution of the preferred res-
olution strategy.
But loss-absorbing capacity is only one
element supporting resolution and banks
need to continue to progress on resolvabil-
ity overall. As the March banking turmoil
has demonstrated, loss-absorbing capac-
ity does not mean resolvability and banks
need to ensure they have in place and are
able to maintain on a continuous basis the
capabilities necessary to best support the
implementation of the preferred resolution
strategy. The EBA has published a number
of guidelines to that end, and is actively
monitoring authorities’ work via the Euro-
pean Resolution Examination Programme.
(
56
)
Also related to MREL instruments, includ-
ing AT1 and T2 instruments, the EBA pub-
lished an updated report on their monitor-
ing.(
57
) According to this report, the EBA has
observed valuable efforts of institutions to
limit the complexity of own funds and eligi-
ble liabilities instruments as well as con-
vergence and standardisation in terms of
drafting of the terms and conditions of the
instruments and issuance programmes.
This is not least the result of the implemen-
tation of previous EBA recommendations
regularly published and communicated by
supervisors to the institutions under their
remit. Going forward, issuers are expected
to avoid unduly complex terms and condi-
tions in their own funds and eligible liabili-
ties issuances so they can retain a  high
level of standardisation.
(
56
) See
EBA resolvability testing guidelines, EBA re-
solvability guidelines, EBA transferability guidelines,
EBA bail-in mechanics guidelines.
See also
EBA 2023
European
Resolution Examination Programme,
first EBA
European Resolution Examination Programme Report
from August 2023.
(
57
) See the EBA’s
Report on the monitoring of Addi-
tional Tier 1, Tier 2 and TLAC/MREL-eligible liabilities
instruments of EU institutions
from July 2023.
Box 5: ESG bond markets have remained
active
ESG bonds have matured since their incep-
tion and have become a common bank fund-
ing instrument. According to the RAQ, 64%
of responding banks have already issued
green bonds (excluding covered bonds),
and 25% green covered bonds. A combined
30% have also issued proceeds-based so-
cial bonds and/or sustainability bonds. Al-
most a  third of respondents have not yet
issued any type of ESG bond.
Based on market data, the total issuance
volume of both green bonds and sustainable
bonds increased in the first nine months of
2023 compared to the first nine months of
2022 (Figure 42). The increase was mainly
attributable to strongly increased green
SNP bonds and green senior unsecured
bonds issued from holding companies. The
volume of green senior preferred bonds
and of green covered bonds also increased
slightly. However, total bank instrument is-
suance volume grew faster than green bond
issuance volume, and the ratio of green
bonds to total bank debt issuance volume
declined in 2023. The share of green bond
issuances also declined for most secured
and unsecured instruments but increased
for SNP bonds and senior unsecured bonds
issued from holding companies.
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Figure  42:
Issuance volumes of green, social and sustainability bonds issued by EU/EEA
banks, Q1–Q3 2021–2023 (EUR bn)
Source: Dealogic, EBA calculations
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
-
2021
2022
Social bonds
2023
Green bonds
Sustainability bonds
In a  similar way to bank funding markets
more broadly, ESG bond issuance also
came to a halt in the aftermath of the March
banking turmoil, but it resumed shortly
after issuance of conventional bonds had
restarted. ESG bond issuance activity was
also reduced at times of heightened volatil-
ity, when issuers still prefer to issue con-
ventional debt instruments.
These developments in issuance activ-
ity also coincide with premia differentials
for green bonds compared to conventional
bonds. A  “greenium”  – a  potential pricing
advantage (premium) for green funding or
financing instruments – has often been ob-
served (see last year’s RAR). The greenium
is considered to be a result of factors other
than credit risk, such as demand for green
products continuing to exceed supply, with
an increasing number of funds which have
committed to only investing in ESG prod-
ucts. The average greenium for senior
preferred bonds was negative (i.e. offering
a pricing advantage) for most of 2023. How-
ever, after the banking sector turmoil in
March, the greenium even turned partially
positive, before again moving into nega-
tive territory. The partially positive gree-
nium for some time in spring implies that
returns demanded by investors on green
bonds exceeded those of conventional
bonds amid uncertain market conditions at
that time, showing that green bonds are not
considered safer but bearing risks similar
to – if not higher than – those for conven-
tional bonds in times of stress.(
58
)
(
58
) Analysis and conclusions based on different sourc-
es, including anecdotal evidence and, for example, the
greenium analysis for corporate bonds in
AFME’s Q2
2023 ESG Finance Report
(data as of July 2023).
3.2.
Liquidity
Banks’ LCR decreased in 2023 but remains
high
The ca.  175% peak in banks’ LCR level as
of December 2021 can be explained by the
accommodative monetary policy of cen-
tral banks to address the outbreak of the
COVID-19 pandemic and its consequences
on the economy. After this peak, the LCR of
EU/EEA banks has gradually declined. Fol-
lowing the outbreak of Russia’s war against
Ukraine and the removal of excess liquidity
by central banks, both in the form of repay-
ment of remaining amounts of TLTRO-3 and
the quantitative tightening announced by the
ECB in December 2022, the LCR decreased to
about 165% until December 2022. The down-
ward trend continued during the first half of
Banks’ liquidity monitoring has gained im-
portance following the March banking tur-
moil. Inappropriate liquidity levels and short-
comings in liquidity risk management were
identified as key determinants on the SVB
failure.(
59
) For EU/EEA banks liquidity re-
mained high but showed a  decreasing ten-
dency since mid-2022. As of June 2023, the
LCR stood at a  comfortable 160.9% and the
NSFR at 126.5%. EBA funding plans also in-
dicate expectations of further decreasing li-
quidity positions in 2023.(
60
)
(
59
) See the
BCBS report on the 2023 banking turmoil from
October 2023.
(
60
) See the
EBA’s report on funding plans
from July 2023.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
2023. The decline of liquid assets  – the nu-
merator of the LCR – was the key driver for
this development. As of June 2023, they de-
creased by 5% YoY, which was above the de-
crease observed in net cash outflows (2.1%
YoY; Figure 43).
Figure 43:
LCR evolution and main components of the LCR as a share of total assets
Source: EBA supervisory reporting data
30%
20%
10%
0%
-10%
-20%
-30%
Dec-2020
Dec-2021
Jun-2022
Outflows considered for the LCR
Net Outflows considered for the LCR
LCR (right axis)
Dec-2022
Mar-2023
Inflows considered for the LCR
Available liquid assets
Jun-2023
180%
175%
170%
165%
160%
155%
150%
145%
140%
135%
130%
The increase in gross outflows between
December 2022 and June 2023 was mainly
driven by growing outflows from other li-
abilities, including derivatives, and non-op-
erational deposits. Outflows from derivatives
increased not least due to negative valuation
effects amid elevated market volatility (Fig-
ure 44).
Figure 44:
Evolution of gross outflow requirement (post-weights) as a share of total assets
Source: EBA supervisory reporting data
Total outflows
Collateral swaps
Security lending
Other liabilities
Committed facilities
Additional outflows
Non-operational deposits
Operational deposits
Retail dep.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Jun-2023
for 60% of the liquidity buffer, but declined
from a share of 70% in June 2022. In paral-
lel, the share of government assets and level
1 securities increased in the total liquid as-
sets available, representing 21% and 11% of
total liquid assets, respectively (Figure  45;
on the rising government assets see also the
analysis showing banks’ rising sovereign ex-
posures in Chapter 2.1).
12.0%
14.0%
16.0%
18.0%
20.0%
Dec-2022
Liquid assets decreased between June 2022
and June 2023, explained by a decline in cash
and reserves of 2.7% of total assets, while
the rest of the categories of liquid assets
increased. With regard to the composition
of the liquidity buffer, there were changes
since June 2022. As of June 2023, cash and
reserves remained the main source of high-
quality liquidity assets (HQLA), accounting
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Figure 45:
Banks’ distribution of the LCR (median, interquartile range, 5
th
and 95
th
percentiles)
and composition of liquid assets as of June 2022 (inner circle) and June 2023 (outer circle)
Source: EBA supervisory reporting data
600%
500%
400%
300%
200%
100% 172.6% 174.5% 164.9% 164.6% 163.7% 160.9%
0%
Dec-2020 Dec-2021 Jun-2022 Dec-2022 Mar-2023 Jun-2023
Quartile: 1-2
Quartile: 2-3
Weighted Average
Cash and reserves
L1 covered bonds
Government assets
L2A assets
L1 securities
L2B assets
2% 2%
4%
11% 7%
18%
21%
60%
2%
1%
2%
70%
Cash and reserves had increased consid-
erably since the outbreak of the pandemic
in March 2020, in particular for euro area
banks, following the introduction of TLTRO-3
(on TLTRO-3 see Chapters  1 and  3.1). How-
ever, the slight increase in outflows due to
the withdrawal of non-operational depos-
its, the repayment in June 2023 of TLTRO-3
and market devaluation triggered the drop of
cash and reserves. Monitoring the evolution
of banks’ LCR levels is particularly relevant
amid the period of monetary policy tightening
and the deteriorated economic outlook.
Amid central banks’ QT, banks might need to
modify their liquidity strategies. Where nec-
essary, the composition of their HQLA might
need to be changed in order to retain liquid-
ity buffers and to withstand the drop in cash
and reserves with other kinds of instruments
such debt securities (on QT see Chapter  1).
Furthermore, there are discussions that the
ECB might increase its MRR ratio from cur-
rently 1%. Such an increase would not only
negatively affect NII, but also have an ad-
verse effect on banks’ LCR. This is because
required reserves do not count towards the
LCR.
Liquidity positions in foreign currencies
tend to be significantly lower
The liquidity position of banks differs widely
when is assessed by currency. While EUR
LCR values were significantly above 100% as
of June 2023, LCR values for other currencies
are significantly lower. Accordingly, liquidity
positions show possible vulnerabilities for
banks when analysed at currency level. EU/
EEA banks’ GBP LCR was reported at 122%
as of June 2023 (GBP LCR ratio of 126% as of
June 2022), while the first quartile of the GBP
LCR was below 100%.
Whereas the USD LCR has been consistently
below 100%, it has increased during the last
year (92.7% as of June 2023, up from 88.2% as
of June 2022). The median USD LCR is above
100%, which indicates that the mismatch is
particularly relevant for some of the largest
banks reporting USD as a significant curren-
cy. These results indicate that the surplus in
liquidity coverage at aggregate level offsets
the liquidity shortfall in USD. The EU liquid-
ity regulation does not require banks to hold
LCR levels in foreign currencies above 100%.
However, low levels of LCR in one or several
foreign currencies may create vulnerabilities
in periods of high volatility, as opportunities
for banks to raise funding in other currencies
or to cover the risk of foreign exchange on
markets may be undermined (Figure 46).
56
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 46:
Evolution of the LCR by currency (left) and dispersion of the LCR by currency (median,
interquartile range, 5th and 95th percentiles, right; both for EUR LCR,GBP LCR,USD LCR)
Source: EBA supervisory reporting data
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
600%
500%
400%
300%
200%
100%
Apr-2021
Apr-2022
Oct-2021
Feb-2021
Jun-2021
Feb-2022
Jun-2022
Oct-2022
Feb-2023
Apr-2023
Aug-2021
Dec-2020
Dec-2021
Aug-2022
Dec-2022
Jun-2023
0%
EUR
GBP
Q1-Q2
Q2-Q3
USD
EUR
GBP
USD
This became particularly obvious amid a sig-
nificant widening of the USD-EUR cross-
currency basis swaps at the end of Septem-
ber  2022. The widening indicates that USD
funding became more expensive for euro
area banks. Although the costs declined in
the first quarter of 2023, the March banking
turmoil also triggered a  sharp increase in
costs of USD funding. The combination of an
LCR in USD below 100% and the rising costs
for USD funding might pose a risk for some
banks, in case they need to quickly fill liquid-
ity gaps in USD (Figure 47).
Figure 47:
Evolution of the cross-currency basis swaps
Source: Bloomberg
0
-10
-20
-30
-40
-50
-60
-70
-80
Jul-2022
Oct-2022
Jan-2023
Apr-2023
Feb-2023
Jun-2023
Jul-2023
Aug-2022
Sep-2022
Nov-2022
Dec-2022
Mar-2023
Aug-2023
May-2023
Sep-2023
The NSFR shows a comfortable level for
banks in all jurisdictions
The NSFR stood at 126.5% in June 2023,
showing an adequate level for all EU/EEA
countries. At country level, all average ra-
tios were above 100% (Figure 48). The ratio is
more or less stable compared to June 2022,
with a decline of 30 bps since then (Figure 48).
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Figure 48:
Net stable funding across EU/EEA countries (left) and net stable funding: distribution
at bank level median, interquartile range, 5
th
and 95
th
percentiles (right)
Source: EBA supervisory reporting data
225%
175%
125%
75%
25%
0%
-25%
RO
LT
CY
MT
HR
SI
LI
IE
PL
BG
PT
EE
HU
AT
NL
GR
BE
SK
IT
LV
ES
DK
LU
DE
FI
SE
NO
FR
250%
200%
150%
100%
50%
NSFR
ASF Asset
RSF Asset
Percentage
Percentage
Q1-Q2 range
Q2-Q3 range
With a share of 48.2% retail deposits are the
main component of banks’ available stable
funding (ASF). Liabilities with undetermined
counterparty come in second place (13.9% of
the total available stable funding), followed
by capital (12.7%). Other financing, such as
funding from non-financial and financial cus-
tomers, represents 21.3% of banks’ available
stable funding. Regarding the denominator of
the ratio, loans are the main component, rep-
resenting 79.7% of the total required stable
funding (Figure 49).
Figure 49:
Components of the net stable funding ratio (RSF – left, ASF – right)
Source: EBA supervisory reporting data
2.08% 2.12%
10.03%
5.80%
9.32%
3.68%
11.98%
79.72%
Central banks
Securities (other than liquid assets)
Interdependent
CCP default fund
OBS items
Capital
NFC
IPS
Liabilities with
undetermined counterparty
Other
Retail deposits
Operational deposits
Financial customers
and central banks
Interdependent liabilities
48.21%
13.90%
0.00%
12.7%
Liquid assets
Loans
IPS
Other assets
In recent years, the accommodative mon-
etary policy together with ample available
central bank funding at attractive conditions
have underpinned banks’ ability to find sta-
ble sources of funding and comply with the
NSFR in a  rather easy way. The favourable
effects for banks’ funding from accommoda-
tive monetary policy are twofold: low yields
and the possibility to use less liquid collat-
eral in exchange for central bank funding.(
61
)
Although the decline of the NSRF since June
2022 has not been significant so far, future
monetary policy developments could trans-
late into further declining NSFR levels going
forward.
(
61
) See the
ECB’s press statement on temporary collateral
easing measures
from April 2020.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
4. Capital
Banks continued to increase their capital
positions and capital ratios reached new his-
toric highs in June 2023. Strong profitability
drove up retained earnings while sluggish
loan growth kept increases of risk-weight-
ed assets at bay. Even though the improved
capital ratios were met by higher capital re-
quirements, banks’ headroom above require-
ments remained at comfortable levels.
Capital ratios reached new highs
EU/EEA banks increased their capital ratios
in the past year and reported new historic
highs. The CET1 ratio improved by 76 bps and
stood at 16.0% in June 2023 (15.2% in June
2022). In line with the CET1 trend, banks’ total
capital ratio increased to 20.0%, 95 bps above
the June 2022 level. The AT1 component of
the total capital ratio increased slightly by
14 bps to 1.4% and the Tier 2 component in-
creased by 5 bps to 2.6% of RWA (Figure 50).
Figure 50:
Capital ratios (transitional definitions)
Source: EBA supervisory reporting data
25%
20%
15%
10%
5%
Dec-2014
Jun-2015
Dec-2015
Jun-2016
Dec-2016
Jun-2017
Dec-2017
Jun-2018
Dec-2018
Jun-2019
Dec-2019
Jun-2020
Dec-2020
Jun-2021
Dec-2021
Jun-2022
Dec-2022
Jun-2023
0%
CET1 ratio
Tier 1 ratio
Total capital ratio
Leverage ratio
The leverage ratio has also increased by 40
bps and stood at 5.7% in June 2023. Most
banks in the sample (82%) reported a ratio of
at least 5% as of June 2023 and have a buffer
of more than 200 bps above the minimum re-
quirement of 3%. This share has increased
by 8 p.p. in the last year (74% in June 2022).
Another 17% of the banks in the sample re-
ported a buffer of between 100 and 200 bps,
while only 1% of the banks were within 100
bps of the minimum requirement (Figure 51).
From January 2023, EU Global Systemically
Important Banks (G-SIBs) have to hold a lev-
erage ratio buffer in addition to the minimum
requirement. This leverage ratio buffer is set
at 50% of the CET1-based G-SIB buffer.
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Figure 51:
Leverage ratio buckets (number of banks)
Source: EBA supervisory reporting data
40
35
30
25
20
15
10
5
0
<=3%
>3% <=4%
>4% <=5%
>5% <=6%
>6% <=7%
>7% <=8%
>8% <=9%
>9% <=10%
>10%
Jun-2023
Countercyclical buffers push up overall
capital requirements
Banks’ headroom over capital requirements
and Pillar 2 guidance (P2G) increased by 29
bps in the last year and stood at 492 bps in
June 2023, up from 464 bps in June 2022
(Figure 52). The increase was driven by im-
provements in the CET1 ratio (see above),
which outpaced the increase in capital re-
quirements. Overall Capital Requirements
(OCR, which consist of Pillar 1, Pillar 2 and
the combined buffer requirements) in-
creased by 50 bps in the last year and stood
at 9.9% of RWA in June 2023. P2G remained
almost unchanged in the last year and stood
at 1.19% of RWA in June 2023. The increase
was driven by the countercyclical buffer,
which increased by 44 bps to reach 0.5% of
RWA in June 2023 (0.1% in June 2022). Vari-
ous macroprudential authorities have set
countercyclical buffer requirements since
2021, some of which have become applicable
by June 2023 (these requirements usually
apply after an implementation period of one
year). Given that some authorities have an-
nounced new countercyclical buffers within
the past year, the importance of this element
within the OCR is expected to increase. Other
requirements also increased slightly in the
last year with the Other Systemically Impor-
tant Institutions buffer up 3 bps to stand at
0.7% of RWA in June 2023 and Pillar 2 re-
quirements up 2 bps to reach 1.1% of RWA.
Figure 52:
CET1 requirements incl. Pillar 2 guidance
Source: EBA supervisory reporting data
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Jun-2019
Pillar 2 guidance
Capital conservation buffer
Jun-2020
Systemic risk buffer
Pillar 2 requirements
Jun-2021
Countercyclical buffer
Pillar 1 requirements
Jun-2022
SII buffer
CET1 ratio
Average capital requirements differ by coun-
try (Figure 53). The highest capital require-
ments are reported by banks in Norway
(17.1%), followed by banks in Iceland (15.2%),
Bulgaria (14.9%)and Sweden (14.5%). In those
countries, authorities in charge of macropru-
dential policy make more extensive use of the
capital buffer framework and set higher buff-
ers for systemic and countercyclical risks.
The lowest capital requirements can be ob-
served in Poland (8.9%), Hungary (9.5%), Por-
tugal (9.6%) and Spain (9.8%), mostly driven
by the absence of sizeable macroprudential
buffers.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 53:
CET1 requirements incl. Pillar 2 guidance, by country
Source: EBA supervisory reporting data
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
AT
BE
BG
CY
CZ
DE
DK
EE
ES
EU/EEA
FI
FR
GR
HR
HU
IE
IS
IT
LI
LT
LU
LV
MT
NL
NO
PL
PT
RO
SE
SI
SK
Pillar 1 requirements
SII buffer
Pillar 2 requirements
CCyB
Capital conservation buffer
Pillar 2 guidance
Systemic risk buffer
CET1 ratio
Strong profitability boosted organic capital
generation
CET1 capital resources have increased by
EUR 72bn or 5% in the last year and stood
at EUR 1.5tn in June 2023. The increase was
almost entirely driven by organic capital gen-
eration as solid profits in 2022 and the first
half of 2023 have provided a boost to retained
earnings (see Chapter 5). Retained earnings
have increased by EUR 124bn or 57% in the
last year but a decline in capital instruments
(i.e. paid-in capital and share premiums) and
higher deductions and adjustments led to an
overall CET1 capital increase of EUR 72bn.
The decline in capital instruments of EUR
33bn or 5% in the last year has picked up
compared to previous years (e.g.  -3% be-
tween June 2021 and June 2022), reflecting
the impact of share buy-back programmes
that many banks have put in place. As a re-
sult, the share of capital instruments has
declined to 35% of the main sources of CET1
capital. Five years ago, this share was about
50% (Figure 54).
Figure 54:
Share of main CET1 capital components (excluding deductions, minority interests and
adjustments)
Source: EBA supervisory reporting data
Dec-
2014
Jun-
2015
Dec-
2015
Jun-
2016
Dec-
2016
Jun-
2017
Dec-
2017
Jun-
2018
Dec-
2018
Jun-
2019
Dec-
2019
Jun-
2020
Dec-
2020
Jun-
2021
Dec-
2021
Jun-
2022
Dec-
2022
Capital instruments
Deductions from CET1 increased by EUR
20bn in the last year. While goodwill-related
deductions decreased by EUR 1bn or 1% over
this period, other deductions increased by
EUR 21bn or 12%. Among these other deduc-
tions, accumulated other comprehensive in-
come (AOCI) and transitional adjustments to
CET1 capital were the most significant driv-
ers of the year-on-year change at EUR 8bn
and 11bn respectively. Voluntary deductions
banks can make based on Article 3 CRR in-
Other reserves
Retained earnings
creased by EUR 2bn or 16% in the last year,
following a steep 65% rise in the year before
(Figure 55). Deductions based on AOCI re-
flect gains or losses that have yet to be real-
ised (like valuations of financial instruments
measured at fair value through OCI that are
impacted by higher interest rates) and rep-
resent the biggest driver of deductions in ab-
solute terms. Intangible assets and deferred
tax assets are the other two major sources of
deductions in absolute terms.
Jun-
2023
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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Figure 55:
CET1 capital components (EUR bn)
Source: EBA supervisory reporting data
2,000
1,500
1,000
500
-
Jun-
2015
Dec-
2015
Jun-
2016
Dec-
2016
Jun-
2017
Dec-
2017
Jun-
2018
Dec-
2018
Jun-
2019
Dec-
2019
Jun-
2020
Dec-
2020
Jun-
2021
Dec-
2021
Jun-
2022
Dec-
2022
Jun-
2023
-500
Retained earnings
Minority interests and adjustments
Other reserves
Goodwill
Other deductions
Capital instruments
Box 6: The AT1 market after the Credit
Suisse AT1 bonds write-down
Funding markets faced major volatility in
the period following the events surround-
ing US banking sector turmoil and CS, in
March this year. Spreads rose significantly,
and primary markets were closed for sev-
eral weeks (see also Chapter 3.1 on fund-
ing markets more generally). Following the
purchase of CS by its domestic rival UBS
and the write-down of CS’s AT1 bonds, the
AT1 market was particularly affected.
Despite the clarification on the status of
AT1s provided by various regulators and
other authorities, including the EBA, the
SRB and the ECB, new AT1 issuances dried
up for several months after the CS event.
(
62
) The AT1 primary market, which had
been quite active since the beginning of the
year, suddenly came to a stop. Caixa Bank
was the last European bank to successfully
issue an AT1 in early March, while banks
which had AT1 call dates in April or May
decided not to exercise them. After being
closed for more than three months, Bank
of Cyprus and BBVA were the first issuers
of AT1 debt in EUR in June  2023. Despite
a slow revival of the AT1 market with an up-
tick of issuances in September, the volume
of AT1 debt issued so far in 2023 is well be-
low issuance trends for other debt classes.
Spreads started to widen across the board
around 9  March  2023, following the reso-
lution of SVB (see Figure 40 and Chapter 3
for more general spread trends during this
period). AT1 spreads went up significantly
on 20 March after the announcement of the
CS takeover. Spreads soon declined from
the peak levels across various debt instru-
ments, but the AT1 market did not recover
to the same extent as other market seg-
ments. EUR senior unsecured asset swap
(ASW) spreads, for instance, were 4 bps
or 3% wider on 31 August compared to 8
March (i.e. before the SVB-related event).
AT1 spreads, by contrast, were still 120 bps
or 23% wider on 31 August. This clearly
shows that the AT1 market was most af-
fected by the March events, in particular
the CS-related write-down (Figure 56).(
63
)
(
62
) See the
SRB, EBA and ECB Banking Supervision
statement on the announcement on 19 March 2023 by
Swiss authorities
from 20 March 2023.
(
63
) This analysis considers a period of in sum 12 months,
around six months before the events in March 2023 and
around six months after the events.
62
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 56:
ASW spread differentials of EUR-denominated bonds – AT1 vs. senior unsecured
funding and vs. T2 funding, in absolute terms (bps; left), and in relative terms (spread
differentials as a share of AT1 spreads); the average shows that of the period 1 September
2022 to mid-March 2023, and mid-March to end of August 2023)
Source: IHS Markit(
64
)
900
800
700
600
500
400
300
200
100
0
01/09/2022
15/09/2022
29/09/2022
13/10/2022
27/10/2022
10/11/2022
24/11/2022
08/12/2022
22/12/2022
05/01/2023
19/01/2023
02/02/2023
16/02/2023
02/03/2023
16/03/2023
30/03/2023
13/04/2023
27/04/2023
11/05/2023
25/05/2023
08/06/2023
22/06/2023
06/07/2023
20/07/2023
03/08/2023
90%
85%
80%
75%
70%
65%
60%
55%
01/09/2022
15/09/2022
29/09/2022
13/10/2022
27/10/2022
10/11/2022
24/11/2022
08/12/2022
22/12/2022
05/01/2023
19/01/2023
02/02/2023
16/02/2023
02/03/2023
16/03/2023
30/03/2023
13/04/2023
27/04/2023
11/05/2023
25/05/2023
08/06/2023
22/06/2023
06/07/2023
20/07/2023
03/08/2023
AT1 vs. T2
AT1 vs. senior unsecured
AT1 vs. T2 (averages)
AT1 vs. sen. unsec. (averages)
vs. T2 (relative)
vs. T2 (relative, averages)
vs. sen. unsec. (relative)
vs. sen. unsec. (relative, averages)
Comparing differentials between debt in-
struments, one can also see major moves
of AT1 spreads vs. senior unsecured and T2
spreads. The average spread differential for
AT1 to senior unsecured bonds widened from
around 504 bps to around 565 bps, and for
spread differentials to T2s from around 409
bps to 466 bps, following the March events.
(
64
) This analysis considers a period of in sum 12 months,
around six months before the events in March 2023 and
around six months after the events.
Spread differentials widened and have not
yet recovered to levels before the respective
events, confirming the view that AT1 markets
are considered riskier than other funding
markets. The CS event has highlighted the
write-down characteristic of AT1 bonds and
has raised questions about the ability of AT1s
to absorb losses in a  bank on a  going-con-
cern basis. Now more than ever, investors
consider AT1s riskier than other bank fund-
ing sources and demand a higher return.
Strong profitability also supported
shareholder remuneration
Dividend payments and share buy-backs
reached record highs in 2022 (Figure 57).
EU/EEA banks distributed almost EUR 63bn
to shareholders, significantly more than the
EUR 48bn banks planned for at the begin-
ning of 2022. The increase was due to higher-
than-expected profits, which allowed banks
to make extraordinary payouts while retain-
ing enough earnings to increase their capi-
tal position. The payout ratio (dividends and
share buy-backs) in 2022 reached 56% of
year-end 2021 profits. This compares with
a  three-year average payout ratio of 50%
(calculated as payouts in 2020–2022 divided
by year-end profits for 2019 – 2021). Dividend
payouts increased by 31% and reached EUR
50bn in 2022 (EUR 38bn in 2021). Payouts in
2021, however, were still partly impacted by
restrictions on shareholder remuneration
put in place after the outbreak of the COV-
ID-19 pandemic. Hence, 2022 payouts likely
included some “deferred” dividend payments
from the years 2020 and 2021. Net share buy-
backs in 2022 surged by 128%, reaching EUR
13bn in 2022 (EUR 6bn in 2021). For the year
2023, banks plan to distribute EUR 53bn to
shareholders, 10% higher than the payout
plans for 2022. Given the record profits made
in 2022 and continued profitability in the first
half of 2023, actual payouts in 2023 might
eclipse the plans made at the beginning of
the year (see Chapter 5 on profitability).(
65
)
(
65
) For the calculation of the payout ratio earnings (de-
nominator) are assumed for e.g. the end of year 2021, and
dividend and other payments (numerator) for end of year
2022. For the calculation FINREP and COREP data is used.
Whereas this approach fits well in cases of yearly dividend
payments, it does not provide correct numbers in the com-
paratively rare cases of interim dividends or in cases where
the sample of banks has materially changed.
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Figure 57:
Dividends and share buy-backs (in EUR bn, lhs) and payout ratio (rhs)
Source: EBA supervisory reporting data
70
60
50
40
30
20
10
-
Dec-2017
Dec-2018
Dec-2019
Dec-2020
Dec-2021
Dec-2022
Dec-2023
Dividend and share buy-back plans
Actual payout ratio (rhs)
Payout ratios in 2022 ranged from close to
0% reported by banks in Greece to 233%
by banks in Latvia (Figure 58). Banks in the
Czech Republic (178%), Portugal (171%), Ro-
mania (132%) and Cyprus (110%) also report-
ed dividend payments and share buy-backs
of above 100% of 2021 profits. One reason
Dividends and share buy-backs
Payout ratio plans (rhs)
for elevated payout ratios are in some cases
extraordinary dividend payments of respec-
tive banks to their foreign holding companies.
Banks that reported high payout ratios in
2022 plan to pay significantly less in 2023. On
the other hand, banks that paid out below av-
erage in 2022 plan for higher payouts in 2023.
160%
140%
120%
100%
80%
60%
40%
20%
0%
Figure 58:
Dividends and share buy-backs (in EUR bn, lhs) and payout ratio (rhs), by country
Source: EBA supervisory reporting data (
66
)
16
14
12
10
Billions
8
6
4
2
-
AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SI SK
Dividends and share buy-backs in 2022
Planned dividends and share buy-backs in 2023
Payout ratio 2022 (rhs)
Payout ratio plans 2023 (rhs)
Risk-weighted assets decline amid stable
lending volumes and lower market risk
Risk-weighted assets (RWA) decreased
by  -0.1% in the last year and stood at EUR
9.5tn in June 2023 (Figure 59). The slight de-
crease was mainly due to decreasing market
risk (-6% in the last year) and credit valuation
adjustment and other risks (-12%), reflecting
the improved market conditions. The com-
bined effect resulted in EUR 58bn being tak-
(
66
) The payout ratio may be affected when banks enter or
exit the market - as in the case of Cyprus - and where there
are interim dividends – vey common in Spain.
250%
200%
150%
100%
50%
0%
en off banks’ total RWA. Despite the height-
ened macroeconomic uncertainty, credit risk
growth was limited to 0.4% of total RWA in
the last year amid stable lending volumes.
Operational risk increased by 2.3% over the
last year. Credit risk remains the largest risk
for banks, accounting for 84% of total RWA,
followed by operational risk (10%), market
risk (4%) and credit valuation adjustment
(CVA) and other risks (3%).
64
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 59:
RWA by type of risk (EUR tn)
Source: EBA supervisory reporting data
10
9
8
7
6
5
4
3
2
1
0
Dec-2014
Dec-2015
Dec-2016
Dec-2017
Dec-2018
Dec-2019
Dec-2020
Dec-2021
Dec-2022
Jun-2015
Jun-2016
Jun-2017
Jun-2018
Jun-2019
Jun-2020
Jun-2021
Jun-2022
Jun-2023
CVA and other
Credit risk
Market risk
Operational risk
Comparing credit risk RWA movements with
trends in underlying credit exposures con-
firms the decrease in credit risk exposures
and reveals slight changes in banks’ risk
profile (see Chapter 2.1 on asset volume de-
velopments). Total credit risk exposures de-
creased by EUR 502bn or 1.9% over the last
year. Exposures to central governments and
central banks were the main driver behind
the overall trend with a  EUR 463bn or 5.6%
decline since June 2022. Exposures to cor-
porates decreased by EUR 87bn or 1.2% in
the same period. Retail mortgages, on the
other hand, increased by EUR 11bn or 0.2%
in the last year and exposures to institutions
increased by EUR 100bn or 4.6% (Figure 60).
Figure 60:
Credit RWA (left) and exposures (right) for selected exposures classes, excluding e.g.
securitisation and equity (EUR tn)
Source: EBA supervisory reporting data
8
7
6
5
4
3
2
1
Jun-2017
Dec-2017
Jun-2018
Dec-2018
Jun-2019
Dec-2019
Jun-2020
Dec-2020
Jun-2021
Dec-2021
Jun-2022
Dec-2022
Jun-2023
0
30
25
20
15
10
5
Jun-2017
Dec-2017
Jun-2018
Dec-2018
Jun-2019
Dec-2019
Jun-2020
Dec-2020
Jun-2021
Dec-2021
Jun-2022
Dec-2022
Jun-2023
Retail other
Institutions
Retail mortgages
Corporates
Other exposures
Central governments
and central banks
-
Diverging trends for RWA vis-à-vis expo-
sure values indicate a  change in risk profile
for several exposure classes in the last year
(Figure 61). Focussing on corporates and re-
tail exposures, the biggest exposure classes,
a trend towards higher risk can be observed.
For corporate exposures, the RWA decline
of  -0.3% was well below the  -1.2% decrease
of the underlying exposure value, resulting in
a higher average risk weight for the remaining
stock of corporate exposures. For retail mort-
gage exposures, the RWA increase of 2.2% far
outpaced the 0.2% increase of the exposure
value. Other retail exposures (e.g. revolv-
ing credit like credit cards or personal lines
of credit) saw the most significant change in
risk, with the RWA increase of 1.8% standing
in stark contrast to the  -2.9% decline in un-
derlying exposure value. As a result, the aver-
age risk weight density for banks’ total credit
risk portfolio rose by 57 bps to 27.4% in June
2023 (26.8% in June 2022), mainly driven by
other retail exposures (up 224 bps to 48.5%)
and corporate exposures (up 43 bps to 51.4%).
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EU RO PEAN
B ANKING
A U THO R ITY
Figure 61:
Year-on-year changes in credit risk RWA and exposures for selected exposures classes
Source: EBA supervisory reporting data
Retail other
Retail mortgages
Other exposures
Institutions
Corporates
Central governments
and central banks
-8,0%
-6,0%
-4,0%
RWA
Internal ratings based (IRB) risk
parameters react to asset quality
deterioration
Parameters for banks’ internal credit risk
models confirm the change in banks’ credit
risk profile, in line with the above RWA analy-
sis for retail exposures (Figure 62). The aver-
age loss given default (LGD) for banks’ retail
-2,0%
Exposures
portfolio increased by 70 bps, bringing the
level to 21.2% in June 2023. The LGD for the
corporate portfolio rose by 11 bps to 33.2%.
The trend for the average probability of de-
fault (PD) was more mixed. The PD for retail
exposures increased by 3 bps to 2.8% in June
2023. The PD for the corporate portfolio,
on the other hand, continued to decline and
stood at 3.2% (-8 bps) in June 2023.
0,0%
2,0%
4,0%
6,0%
Figure 62:
IRB parameters PD (left) and LGD (right) for selected exposures classes
Source: EBA supervisory reporting data
PDs
5%
4%
3%
25%
2%
1%
0%
Dec-2019
Dec-2020
Dec-2021
Dec-2022
Jun-2019
Jun-2020
Jun-2021
Jun-2022
Jun-2023
20%
15%
Dec-2019
Dec-2020
Dec-2021
Dec-2022
Jun-2019
Jun-2020
Jun-2021
Jun-2022
Jun-2023
35%
30%
LGDs
Corporates
Retail
Total exposures
Corporates
Retail
Total exposures
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
5. Profitability
EU/EEA banks’ profitability rose substan-
tially, driven by a large rise of NII. The NII in-
crease was supported mainly by a  widening
NIM rather than loan growth. On the back of
central banks’ monetary policy tightening,
banks were able to leverage on the increasing
interest rates to increase their NII. Although
this has been broadly based, some banks
benefited more depending on their business
model or their asset and liability structure.
Going forward, profitability growth could
slow down amid emerging trends of repricing
of the liability side faster than the asset side.
Low asset growth could dampen fees gener-
ated, stickier inflationary pressures might
weigh on costs and impairments might suffer
from a deterioration in asset quality.
Profitability position of the EU/EEA banking
sector
The RoE of EU/EEA banks reached 11% in
June 2023, the highest RoE since the EBA
started collecting banks’ data. This com-
pares to 7.9% a  year earlier. Such a  mate-
rial increase is almost entirely attributable
to higher NII  – its contribution to the return
on equity increased by 376 basis points com-
pared to the previous year. In contrast, net fee
and commission income (NFCI) and net trad-
ing income (NTI) had negative contributions
(37 and 44 respectively). Despite the strong
inflationary pressures in the economy, banks
managed to limit the increase in their staff
expenses (negative contribution of 27 bps).
While provisioning costs have negatively af-
fected profitability, impairment releases
have partly offset this (Figure 63).
Figure 63:
Contribution to the RoE of the main P&L items, comparison between June 2022 and
June 2023; calculated as a ratio to total equity
Source: EBA supervisory reporting data
12.0%
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
ROE previous
NTI
Oth. op. inc.
Impairments
Contr. DGS and RF
Other (incl. tax)
NII
NFCI
Staff exp.
Other admin.
Prov.
ROE period
7.9%
3.8%
-0.4%
0.1%
-0.4%
-0.3%
-0.1%
0.4%
-0.2%
0.1%
0.1%
11.0%
Although the improvement in profitability has
been broad-based, there have been mate-
rial differences across jurisdictions. Several
central and eastern European countries re-
ported an average RoE of more than 20%.
Hungarian and Cypriot banks not only re-
ported the highest levels of RoE, as of June
2023, but they have also reported the larg-
est incremental increases in the indicator
compared to June 2022. This could be attrib-
uted to the combination of a  large share of
variable rates for loans to HHs and NFCs and
a large reliance of their funding on deposits,
but also banks’ idiosyncratic effects not least
related to developments in their subsidiar-
ies in countries that might be affected by
extraordinary developments, such as a  war
or other similar events. Conversely, banks in
large jurisdictions, such as France and Ger-
many, performed worse, not least owing to
the slower repricing of the asset side due to
a high share of fixed-rate loans (Figure 64).
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EU RO PEAN
B ANKING
A U THO R ITY
Figure 64:
Annualised return on equity by country
Source: EBA supervisory reporting data
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
HU
CY
LV
LT
RO
BG
EE
HR
SI
PL
PT
SE
CZ
FI
BE
AT
NO
IT
GR
SK
IE
NL
MT
ES
IS
DK
EU
LU
FR
LI
DE
Jun-2022
Return on (average) assets (RoA) also in-
creased substantially from June  2022 to
June  2023, from 0.49% to 0.70%. The in-
crease in this indicator is even more pro-
nounced compared to the RoE, as the total
assets decreased marginally over the period,
while equity of the banks increased. The im-
Jun-2023
provement in profitability and related profit-
ability expectations have also contributed to
an increase in the average price to book (PtB)
ratio of the Euro Stoxx Banks index, nearly
reaching 0.8. However, it remains firmly an-
chored below 1 and lower than, for instance,
that of their US peers (Figure 65).
Jun-23
Dec-22
May-23
Mar-23
Nov-22
SX7E Index
The improvement in profitability indicators
has helped EU banks to close the gap be-
tween their return and cost of equity (CoE).
Yet, RAQ results show that the majority of
banks still report a lower RoE than their CoE.
According to RAQ results, 40% of banks esti-
S5Bankx index
mate their CoE below 10%, and 35% between
10% and 12%. Larger banks tend to report
a  lower CoE than small and medium-sized
banks, the majority of which report a  CoE
higher than 12% (Figure 66).
Aug-23
Apr-23
Sep-23
Jan-23
Feb-23
Oct-22
Jul-23
-5.0%
Figure 65:
Variation of PtB ratio of SX7E and S5Bankx indices from September 2022 to September
2023
Source: Bloomberg
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Sep-22
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 66:
Estimated cost of equity variation (top) and by bank size, autumn 2023 (bottom)
Source: EBA Risk Assessment Questionnaire
42%
40%
30%
20%
10%
0%
Sep-2021
Sep-2022
Sep-2023
Sep-2021
Sep-2022
Sep-2023
Sep-2021
Sep-2022
Sep-2023
Sep-2021
Sep-2022
Sep-2023
Sep-2021
Sep-2022
Mar-2021
Mar-2022
Mar-2023
Mar-2021
Mar-2022
Mar-2023
Mar-2021
Mar-2022
Mar-2023
Mar-2021
Mar-2022
Mar-2023
Mar-2021
Mar-2022
Mar-2023
Sep-2023
42% 43%
35%
31%
31%31%
28%
31%
24% 25%
41%
15%
12%
8% 8%
7%
6% 12%
17% 17%
11%
25%
23%
10%
5%
3% 5%
5%
9%
a) < 6%
b) 6% and < 8%
c) 8% and < 10%
d) 10% and < 12%
e) 12%
a) < 6%
b) 6% and < 8%
c) 8% and < 10%
d) 10% and < 12%
e) 12%
0
10
20
Big
NII increase is led by a strong uptick of NIM
EU/EEA banks’ net operating income (NOI)
rose by 14.8% in the 12 months from June
2022 to June 2023 amid an increase in NII of
more than 20%. At the same time, NFCI mar-
ginally increased by 1%, while NTI decreased
Figure 67:
NII as % of NOI
Source: EBA supervisory reporting data
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
LI FR DE DK IT LU EU HU HR FI AT RO IE BG SK BE CZ CY NL PT IS SE ES SI NO GR LV EE MT LT PL
30
Medium
Small
40
50
by 11%. At EU/EEA level, NII accounts for 61%
of NOI, yet this is widely diversified with Pol-
ish banks reporting 93% and banks in Liech-
tenstein just 26%. Germany and France have
a below-average contribution of NII with 56%
and 43% (Figure 67).
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EU RO PEAN
B ANKING
A U THO R ITY
The increase in NII was driven by widening
margins. These were kept for a  long period
at historically narrow levels, also because of
the low/negative interest rate environment.
EU/EEA banks have been able to widen their
margins as they have been able to reprice
their asset side faster than their liability side.
On the other hand, the interest-earning as-
sets contribution was muted over the period,
not only due to macroeconomic headwinds
that affected loan growth, but also because
of borrowers’ incentive to repay early their
variable rate loans (Figure 68).
Figure 68:
Contribution to NII (June 2022 to June 2023).
Source: EBA Supervisory reporting data
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Var. interest-earning assets
Going forward, the widening in NIMs might
slow down as repricing of the liability side
“catches up” the asset side. Although NII has
increased rapidly in the last quarters, slower
economic growth which has also affected
new loan generation, may affect the NII
growth going forward. An increasing share of
banks expect to slow down their loan growth
22.9%
22.9%
-0.1%
Var. NIM
Var. NII
amid elevated macroeconomic uncertainty
(see Chapter  2.1), which would accordingly
negatively affect the pace of NII growth (see
more details in the section below). There
have already been some signs of this during
the second quarter of 2023 as NIM widening
pace slowed down notably compared to pre-
vious two quarters (Figure 69).
Figure 69:
Quarterly percentage point change in net interest margin in the last quarters
Source: EBA Supervisory reporting data
18
16
14
12
10
8
6
4
2
0
Q3 2022
Q4 2022
NIM increase in bps
Q1 2023
Q2 2023
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
NFCI and NTI contributions to NOI are
decreasing
NFCI is the second most relevant revenue
item, accounting for 27.6% of NOI, compared
with 31.3% a year ago. The higher ratio than
average of NFCI to NOI in some countries
can be attributable to the presence of large
investment banks, such as in France with
36% or Germany with 29%. Conversely, some
countries have a  low ratio of NFCI to NOI,
such as Malta or Norway with 13% and 14%.
While the ratio of NFCI to NOI had a signifi-
cant decrease mainly due to the strong up-
tick of NII, the absolute amount of NFCI de-
creased slightly from June 2022 to June 2023
(-0.8%). Half of the fee items are increasing,
with a strong uptake of custody (12%), and in-
creases in payment services and lending, (7%
and 2%), as well as the remaining fee income
category with an increase of 2%, all other
fees are decreasing. The decrease of 5% in
asset management and related services and
of 6% in distribution of non-managed prod-
ucts, which represent respectively 20.8% and
13.6% of NFCI, weighed heavily on the total
variation (Figure 70).
Figure 70:
Breakdown of fee and commission income (June 2023) and variation of its main
components (June 2022 – June 2023)
Source: EBA supervisory reporting data
18.7%
15%
20.6%
10%
2.9%
13.5%
9.0%
6.7%
27.7%
Asset management & rel. serv.
Corporate finance
0.9%
Custody
Payment services
5%
0%
-5%
-10%
-15%
Lending
Distr. non-managed products
Securities
Other
The NFCI to NOI ratio has now reached the
lowest since June 2017, quite the opposite
to the magnitude it reached under the for-
merly prevailing low-rate environment. In
a  context of subdued economic growth and
high interest rates, fees and commissions
associated with the generation of new loans
are expected to decrease further. In addition,
market volatility and the rate environment
might have a negative impact on asset man-
agement fees.
NTI accounts for ca. 7% of EU/EEA banks’
NOI as of June  2023. It remains a  volatile
element of the NOI with also great variabil-
ity between countries. Countries with banks
conducting large market activities such as
France or Germany have a  high NTI to NOI
ratio (respectively 17%, and 13% for both),
while other countries have zero contribution
of NTI, such as Greece or Portugal, or even
negative contributions in the case of Hungary
and Bulgaria (both -0.03%).
EU/EEA banks contained their operating
costs
Despite the strong inflationary pressures of
the previous quarters, characterised by ris-
ing core inflation and stronger second-round
effects on the service sector and on wages,
EU/EEA banks’ cost increase was less than
inflation in the period between June 2022 and
June 2023. In absolute terms, staff and other
administrative expenses increased by 4.9%
over the period, mainly driven by increasing
staff expense of 5.6% year on year.(
67
) The
increase is, however, less pronounced when
considering also contributions to deposit
guarantee schemes (DGSs) and resolution
funds (RFs) as well as depreciation, limiting
the total cost increase to 2.8%.
As a  result of the strong increase in in-
come and the comparatively lower increase
in costs, the average cost-to-income ratio
(CIR) continued to decline, from 61% to 56%,
(
67
) As of June 2023, annual inflation in the EU was 6.4%
(see
Eurostat – June inflation data,
from 19 July 2023).
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EU RO PEAN
B ANKING
A U THO R ITY
the lowest level since EBA started reporting
the indicator at the end of 2014. Looking at
country level, some of the countries with the
largest banking sector, such as France and
Figure 71:
CIR by country (June 2023)
Source: EBA supervisory reporting data
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Germany, have a  high CIR, respectively 71%
and 64%, while some of the lowest CIRs are
to be found in Latvia and Portugal, both be-
low 35% (Figure 71).
LI FR DE LU EU HU BE CZ MT IT NL AT SI IE ES DK PL RO FI SK SE BG EE NO IS HR LT GR CY PT LV
Q2 23
Q2 22
operating expenses tend to be lower in Nor-
dic and Baltic countries; this can presumably
be attributed to the high share of corporate
and household customers that are comforta-
ble with online and digital banking (Figure 72)
Operating expenses accounted for 19.9%
of total equity as of June 2023 (20% in June
2022), with approximately half (10.5%) regis-
tered as staff expenses, 8.1% as other admin-
istrative expenses and 1.4% as contributions
to DGSs and RFs. Looking at regions, total
Figure 72:
Operating expenses as % of equity by country (June 2023)
Source: EBA supervisory reporting data
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
HU LI RO ES PL IT DE FR EU LT NL CY AT MT CZ SI BE LU SK IE BG PT EE FI LV DK HR GR SE IS NO
Staff expenses
Other adm. exp (incl. deprec.)
Contributions to DGS and RFs
seen their operating expenses compared to
equity decrease in a context of strong infla-
tionary pressures. Only a few countries man-
aged to reduce staff expenses while a major-
ity have decreasing expenses on DGSs and
RFs (Figure 73).
Operating expenses as a  percentage of eq-
uity have remained stable over the past year,
with a decrease in expenses related to DGSs
and RFs by  -0.4%, a  contained increase in
staff expense of 0.3% and a limited increase
of 0.1% in other administrative expenses. On
a  country basis, 10 out of 30 countries have
72
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 73:
Year-on-year variation and breakdown of operating expenses as % of equity by country
(June 2023)
Source: EBA supervisory reporting data
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
PL CY GR MT FR SK DE SI LU PT EU IT AT BE NL NO IS DK HR SE IE FI RO ES CZ LV BG LI EE LT HU
Staff expenses
Other adm. exp (incl. deprec.)
Contributions to DGS and RF
Op expense
Depending on the business model of banks,
operating expenses represent a different share
of equity. In this regard, cross-border univer-
sal banks, which are mainly the largest banks,
have on average higher costs than other banks.
On the other hand, local universal banks, i.e.
banks with a similar business model but locat-
ed within the borders of one country, have lower
cost of around 300 bps than cross-border uni-
versal banks. The smallest share of operating
expenses as a percentage of equity is reported
by corporate-oriented banks, which are able to
maintain their operating expenses at less than
half compared to other business models, and
even less than one-third compared to cross-
border universal banks (Figure 74).
Figure 74:
Operating expenses as % of equity by business model (June 2023)(
68
)
Source: EBA supervisory reporting data
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
Consumer/auto
Corporate-oriented
Cross-border universal
Local universal
Provisions
Impairments
Other
Staff expenses
Other adm. exp (incl. deprec.)
(
68
) For the purpose of the business-model-based analysis
of banks’ profitability, banks were classified into the following
five categories: consumer/auto (focused on originating and
servicing consumer loans to retail clients); corporate-orient-
ed (institutions specialised in financing domestic and inter-
national trade); cross-border universal (institutions engaged
in several banking activities including retail, corporate and
capital market operations, with major cross-border opera-
tions); local universal (institutions engaged in several bank-
ing activities including retail, corporate and capital market
operations but operating predominantly in their domestic
market); public (institutions financing public sector projects
or providing promotional credit or municipal loans). In the
figure, “Local universal” also includes the following business
models: local cooperative and savings. “Other” includes the
following business models: custodian, mortgage and private.
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EU RO PEAN
B ANKING
A U THO R ITY
The increase in operating expenses is largely
attributable to inflationary pressures that
have affected banks’ cost base. A clear corre-
lation between inflation and variation in staff
expense and other administrative expense as
a proportion of equity can be drawn. It is ap-
parent that banks located in countries most
affected by inflation had to increase their
cost-reduction efforts if they wanted to limit
their cost base increase (Figure 75).
Figure 75:
Correlation of end-2022 inflation rate and June  2022 to June  2023 change in staff
expense and other administrative expense as a proportion of equity
Source: Eurostat, EBA supervisory reporting data
21%
19%
17%
End-2022 inflation rate
15%
13%
11%
9%
7%
5%
y = 1.4939x + 0,0921
R² = 0.4244
-4%
-2%
0%
2%
4%
Variation in staff expense and other administrative expense as a proportion of equity
6%
8%
Information technology (IT) costs are the
most significant part of other administrative
expenses, accounting for 31%, which is simi-
lar to last year (30% as of June 2022).(
69
) Tax-
es and duties as well as consulting represent
11% of the other administrative costs, while
advertising, marketing and communications
as well as real estate expenses amount to 6%
each (Figure 76).
Figure 76:
Breakdown of share of other administrative expenses as of June 2023
Source: EBA supervisory reporting data
1%
1%
2%
31%
31%
Information technology expenses
Taxes and duties (other)
Consulting and professional services
Advertising, marketing and communication
Real estate expenses
Other administrative expenses - rest
Expenses related to credit risk
Litigation expenses not covered by provisions
Leasing expenses
6%
6%
11%
11%
(
69
) On last year’s share of IT expenses see the
EBA’s Risk
Assessment of the European Banking System
from Decem-
ber 2022.
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2818821_0077.png
R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Impairments remain unaffected by
deteriorating macroeconomic outlook
Impairment charges, i.e. charges for loan
loss provisions, decreased by 2% from June
2022 to June 2023. The CoR of EU/EEA banks
stayed stable during the same period at
0.45% (see Chapter 2.2). Impairment charges
as a percentage of equity decreased by 13 bps
to 2.37% for the EU average, with Spain and
Greece registering particularly high rates
above 6% while some countries such as Cro-
atia, the Czech Republic or Malta have nega-
tive impairment charges compared to equity.
Provisions (other than those related to credit
impairments) increased to 0.4% of equity in
June 2023, from 0.3% as of June 2022 (Figure
77).
Figure 77:
Impairments as % of total equity by country, June 2022 and June 2023
Source: EBA supervisory reporting data
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%
-4.00%
ES GR PT PL HU CY SK LT EU RO IT FR DE IE AT IS NL LU FI SE NO BE EE LI BG SI DK LV MT CZ HR
Jun-2023
Jun-2022
Fintech and BigTech disruption challenges
banking sector revenues while creating
opportunities
Competition from new entrants using fi-
nancial technology (fintechs) and so-called
BigTech companies (i.e. the biggest technol-
ogy companies) has intensified over the last
years for the incumbent players. Such com-
petitive forces are mostly evident in payment,
retail banking and retail brokerage, RAQ
results show. In these business lines incum-
bent banks see an elevated risk of a negative
revenue impact. Such risk is not material for
corporate banking services (including corpo-
rate finance) and other wholesale services
such as trading and sales or asset manage-
ment. So far, for these services, banks do not
see any material impact from fintech disrup-
tion. Nevertheless, the presence of these
firms and the highly competitive landscape
are a strong driver for increased technology
adoption by incumbents to achieve greater
efficiencies, including more agile and low-
cost services. An increasing proportion of
banks perceive the competitive forces from
fintech companies as an opportunity to either
increase revenues in the traditional banking
services such as retail and corporate bank-
ing or lower their costs in the area of pay-
ment and services (Figure 78).
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EU RO PEAN
B ANKING
A U THO R ITY
Figure 78:
Banks’ expectations of how fintech will affect their business lines
Source: EBA Risk Assessment Questionnaire
a) Retail banking
b) Commercial banking
c) Corporate finance
d) Trading and sales
e) Payment and settlement
f) Agency services
g) Asset management
h) Retail brokerage
0
No impact / not relevant
Risk to decrease revenues
10
Risk to increase costs
have entered or intend to enter into a  part-
nership with a large technology company for
the distribution of financial or non-financial
services or any other purpose. The use of
such partnerships or intention to enter into
an M&A transaction is particularly important
for bigger banks, while smaller institutions
seem less likely to make use of these part-
nerships (Figure 79).
20
30
40
50
60
Opportunity to decrease costs
Opportunity to increase revenues
To take advantage of the arising opportuni-
ties for the sector, banks either develop in-
ternally the expertise to support new service
channels or enter into partnerships with
technology companies. Around 10% of the
banks asked in the RAQ suggested they may
consider a  merger or acquisition (M&A) of
a  fintech company. In addition, around two-
thirds of the respondents suggested that they
Figure 79:
Banks that have entered or intend to enter within the next two years into a partnership
with a large technology company whose primary activity is the provision of digital services
Source: EBA Risk Assessment Questionnaire
12%
36%
24%
a) Yes, for the distribution of financial services
b) Yes, for the distribution of services that are not-financial
services
c) Yes, for any other purpose
d) No
28%
Profitability varies greatly within the EU/
EEA banking sector
While the European banking sector finds it-
self in a  good overall position with its prof-
itability, there are major differences across
Europe. The first difference comes from the
location, with euro area countries displaying
on average a  lower profitability than non-
euro area countries (simple average RoE of
15.4% vs. 16.6%). This can be partly explained
by the fact that non-euro countries’ central
banks tightened their policy stance at an ear-
lier stage than the ECB. Furthermore, there
are important differences driven not only by
the region, but also business models, com-
petition, asset and liability mix, etc. Banks
located in the eastern and southern regions
are more profitable, while banks located in
the north and in the central region reported
lower returns on their equity. This differ-
ence is also reflected in the expectations of
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
the banks for their future profitability. In the
RAQ, banks from southern Europe are nota-
bly more optimistic about their profitability
prospects than northern banks for instance
(Figure 80).
Figure 80:
Simple average RoE by region (left) and expected increase in the bank’s RoE over the
next 6 to 12 months (right)
Source: EBA supervisory reporting data and EBA Risk Assessment Questionnaire
25%
a) Yes
20%
b) Probably yes
15%
c) Probably no
10%
5%
0%
d) No
e) No opinion
Center
Northern
Southern
Eastern
Average RoE by European region
Variations of profitability are also explained
by the exposure mix of the banks. Banks
that have a larger share of non-variable rate
on their asset side are less well oriented to
benefit immediately from rising rates. This
is notably the case for French and German
banks as they report a smaller-than-average
share of variable-rate loans. Further to this,
a major driver of the difference in profitabil-
ity is the fact that some banks were able to
limit the repricing of their liabilities, notably
deposits, and to diminish the pass-through
0
Center
10
20
Eastern
30
Northern
40
50
Southern
of interest rates (see textbox on interest rate
risk in this chapter).
Finally, some banks have large investment
banking activities, such as in France and
Germany. These jurisdictions tend to be ex-
posed to a  greater volatility in their income.
In this regard, there is a  small correlation
between RoE and the ratio of market RWA to
total RWA, hinting at this possibly negative
effect in a context of corrections on financial
markets (Figure 81).
Figure 81:
Correlation between RoE and market RWA as a share of total RWA
Source: EBA supervisory reporting data
30%
25%
20%
Return on equity
15%
10%
5%
MT
SK
CY
LV
BG
EE
LT
RO
HR
PL
NO
IS
LU
PT SE
CZ
BE
GR FI IT
ES NL
FR
2%
3%
4%
5%
Market RWA as a share of total RWA
6%
7%
SI
EU
AT
DK
y = -1.4254x + 0.1927
R² = 0.3148
IE
HU
LI
8%
DE
9%
0%
1%
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EU RO PEAN
B ANKING
A U THO R ITY
The profitability of banks that have the larg-
est investment banking activities, such as in
France or Germany, might have been nega-
tively affected by corrections on financial
markets, besides other factors (such as
pressure on NIMs due to specific considera-
tions on e.g. deposit or mortgage pricing).
Another driver of this negative relationship
is the slower growth and activity prospects
which are detrimental to investment banking
business, notably in terms of fees such as in
investment banking’s equity or M&A busi-
ness lines.
Macroeconomic environment will put
pressure on banks’ profits
Future asset and liability repricing trends
will be key to maintaining profitability levels.
Banks still expect profitability to further im-
prove, as they expect benefits in NII to further
materialise in the next quarters (close to 80%
of the banks surveyed in the RAQ). However,
the share of banks expecting an increase is
lower than in previous questionnaires, in-
dicating that NII growth is approaching its
peak. Around one-third of the banks expect
an increase in impairments, yet this share
is lower than in the previous survey (46% in
spring 2023 vs. 34% in autumn 2023). This is
probably driven by the better-than-expected,
yet still subdued, economic growth (Figure
82).
Figure 82:
Areas on which the rising interest rates have an effect (% of responding banks)
Source: EBA Risk Assessment Questionnaire
87%
80%
60%
83%
73%
73%
92%
79%
46%
40%
20%
5%
0%
Mar-2023
Sep-2022
Sep-2023
Mar-2023
Mar-2023
Mar-2023
Mar-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
32%
15%
6%
13%
11%
34%
8%
a) Overall profitability
b) Net interest income
c) Net fee and commission income
d) Net trading income
e) Impairments
The profitability dynamics are also defined
by the specific exposure mix of each bank.
Specific portfolios, such as CRE, are ex-
pected to reprice faster than other portfolios
with a  high share of fixed-rate loans such
as mortgage portfolios. The latter have the
longest fixation period. A significant share of
banks (33%) report their RRE portfolio has an
interest rate fixation period longer than ten
years, as RAQ results show. These portfolios
take longer to reprice, especially in a period
of subdued new loan generation, impairing
banks’ capacity to benefit from the higher in-
terest rate environment. On the other hand,
loans with fixed-rate portfolios are expected,
on average, to have a  lower credit risk than
variable-rate loans, in which borrowers have
to bear the substantial increase in the cost of
borrowing (Figure 83).
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 83:
Share of loans repricing in the next 12 months (top) and average interest rate fixation
periods for loans at origination (bottom) (% of responding banks)
Source: EBA Risk Assessment Questionnaire
a) CRE
b) SME
c) Residential Mortgage
d) Consumer credit
e) Large corporates
0
a) 0%-20%
10
b) 20%-40%
c) 40%-60%
20
d) 60%-80%
30
e) 80%-100%
40
Not applicable
a) CRE
b) SME
c) Residential Mortgage
d) Consumer credit
e) Large corporates
0
b) >1 year and 3 years
10
20
c) >3 years and 5 years
30
d) >5 years and 10 years
40
e) >10 years
50
Not Applicable
a) 1 year
In a  similar way to the asset side, there is
material variation in the cost of funding de-
pending on banks’ liability mix. Funding costs
rose for all banks, with yields and asset-
swap spreads increasing materially for the
EU/EEA region (see Chapters 1 and 3). Banks
with higher reliance on market funding have
seen their funding cost increasing signifi-
cantly. This has affected more those banks
that rely heavily on issuing debt securities
for their funding purposes. The annualised
average expense as a  proportion of the to-
tal outstanding amount of debt securities in
the EU was at 1.27% as of June 2022, which
was nearly doubled as of June 2023 to reach
2.59%. The standard deviation increased
during the period from 1.64% in June 2022 to
1.87% in June 2023, showing that the end of
the low-rate environment translated not only
into rate rises but also into an increased dis-
parity. It should be noted that while the re-
pricing of debt securities has been fast, they
only represent 18.7% of the liability side of
EU/EEA banks’ balance sheet (Figure 84).
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EU RO PEAN
B ANKING
A U THO R ITY
Figure 84:
Average remuneration increase in bps on debt securities issued by country between
June 2022 and June 2023
Source: EBA supervisory reporting data
123
166
170
143
120
157
127
127
142
7
132
123
273
-24
106
39
245
163
0
103
110
303
-78
160
Average bps increase on payments for debt securities issued
In contrast to debt securities, deposits from
customers (both HHs and NFCs) are more
relevant in the overall funding mix (see Chap-
ter  3.1 on funding composition). These cli-
ent deposits reprice at a  slower rate than
market-based funding (see also the box on
deposit betas in this chapter and Chapter 3.1
on funding, including pricing developments
for different instruments). Banks that rely
mostly on retail deposits, such as in Malta
or Slovenia where more than 60% of liabili-
ties are deposits from HHs, have been able
to sustain their funding cost at low levels, as
deposit repricing actions remained low.
The end of the TLTRO funding in 2024 associ-
ated with the higher funding cost on whole-
-78
370
sale markets could incentivise banks to
better remunerate deposits to attract more
affordable funding. As well, a combination of
growing pressure from customers, alterna-
tive investments supported by government
such as public bond issuance marketed for
retail, and political pressure might also push
banks to increase remuneration served on
deposits. Such a trend would affect NIM and
subsequently NII. In the RAQ, 75% of banks
say they intend to raise rates on HH deposits
and 76% for NFC deposits. Consistently with
this view, an increasing number of banks ap-
pear to be targeting deposits to meet their
funding needs, replacing market and central
bank funding (Figure 85 and Figure 37).
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 85:
Given rising interest rates, actions banks are considering in relation to deposits (% of
responding banks)
Source: EBA Risk Assessment Questionnaire
85%
80%
60%
40%
20%
0%
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Mar-2022
Sep-2022
Sep-2023
Mar-2022
Sep-2022
Sep-2023
Sep-2022
Mar-2022
Mar-2023
Mar-2022
Mar-2023
Mar-2023
Mar-2023
Mar-2022
a) Raise rates for household deposits
or current accounts*
b) Raise rates for NFC* deposits
or current accounts
c) Charge lower fees for household
deposits or current accounts* and
related services
d) Charge lower fees for
NFC deposits or current accounts
and related services*
Mar-2023
f) Other
Mar-2023
Sep-2023
Sep-2023
76% 75%
57%
76%
68%
52%
33%
22%
5%
7%
5%
5%
13% 12%
18%
5%
1%
8%
15%
e) None of the above
The ECB’s decision to no longer remunerate
banks’ MRR also has a  negative impact on
their NII (see on MRR in Chapter  1). Finally,
the gradual depletion of economic growth
forecasts for 2023 and 2024 can have mate-
rial effects on banks’ ability to slightly pivot
their income split towards a  greater fees
share, like the EU/EEA banking sector man-
aged during the low-rate environment (see
on the economic outlook Chapter 1).
Going forward, active cost management
remains important given persistent
inflation and increased foreseen expenses
According to the RAQ, the relevance of infor-
mation and communication technology (ICT)
investments is still important. 94% of banks
deem that one of the primary measures to
reduce operating expenses is to increase
automation and digitalisation. In contrast,
staff cost reduction is decreasing, from Sep-
tember 2022 at 72% to 60% as of September
2023. As well, reducing business activities
decreased materially during the same period
from 48% to 27%, which might be due to the
overall better shape of EU/EEA banks’ profit-
ability (Figure 86).
Figure 86:
Measures that banks are primarily taking to reduce operating expenses/costs
Source: EBA Risk Assessment Questionnaire
100%
80%
60%
40%
20%
Mar-2022
Sep-2022
Mar-2023
Sep-2023
95% 95% 93% 94%
73% 72%
60% 60%
47% 48%
27% 27%
14% 13% 17% 12% 18%
10% 7% 13%
Sep-2022
Mar-2022
Mar-2022
Mar-2022
Mar-2023
Mar-2022
Mar-2023
Sep-2023
Sep-2022
Mar-2023
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Mar-2023
11% 11%
3% 7%
Mar-2022
Sep-2022
0%
a) Overhead and staff
costs reduction
b) Outsourcing
c) Off-shoring or near-shoring d) Reducing business activities
(business lines and locations,
incl. branches)
e) Increasing automation
and digitalisation
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EU RO PEAN
B ANKING
A U THO R ITY
Analysis shows a  positive correlation be-
tween IT investments – measured as a share
of other administrative expenses – and staff
expense  – measured as a  share of total op-
erating income. This might imply that IT in-
vestments do not necessarily result in lower
staff expenses. However, it might in contrast
indicate that banks invest in IT to address
their high staff expenses. Nordic coun-
tries  – where total operating expenses are
lower compared to the EU/EEA average and
other regions (see above)  – tend to display
a  comparatively high share of IT expenses
as a share of other administrative expenses
and high staff expenses as a  share of total
operating income. This elevated share of IT
expenses can be partly explained by famili-
arity of customers with online and digital
banking. Taking information from a European
Commission survey, there is a correlation at
country level between IT expenses and the
share of customers that are comfortable with
online and digital banking.(
70
)
As such, IT expenses are assumed to have
a positive impact on efficiency at least in later
years and in the end positively affect profit-
ability. However, while IT investments in gen-
eral improve customers’ experience when
using banking services, their impact could be
weaker in cases where customers are less
inclined to adopt online banking services
(Figure 87). The relevance of IT investments
and if they result in a genuinely positive out-
come for a  bank was similarly part of the
EBA’s European Supervisory Examination
Programme  2023. It asked supervisors to
look into whether investments spent on digi-
tal efforts achieve actual transformations,
and how institutions measure the success of
their digital strategy.(
71
)
Figure 87:
Correlation of staff expense as a share of total operating income with IT expense as
a share of other administrative expenses (left), and correlation of customers comfortable with
online/digital banking with IT expense as a share of total other operating expenses (right)
Source: EBA supervisory reporting data, European Commission “Monitoring the level of financial
literacy in the EU”(
72
)
60%
FI
IT expense as a share of other administrative expenses
50%
BG
40%
30%
20%
HU
10% LT
0%
30.0% 35.0% 40.0% 45.0% 50.0% 55.0% 60.0% 65.0% 70.0% 75.0%
Staff expense as a share of operating expenses
LV
CZ
IS
Very comfortable with digital banking and online payments
DK
HRDE LU
SK SE
EEBE
AT NO
MT ES
NL
EU
RO PT
IE
SI CY FR
IT
PL
GR
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
0%
10%
20%
30%
40%
50%
IT expense as a share of total other expenses
60%
HU PL
LV
EL
LT
FI
AT SEHR
CZ
NL
MT EE SK DK
DE
SI IE RO
BG
CY
EU
BE
LU
FR ES
IT
PT
y = 0.4154x + 0.2954
R² = 0.1432
y = 0.4759x + 0.0715
R² = 0.0905
LI
(
70
) This refers to the share of surveyed people that “feel
confident managing their money and transactions online
securely, via website or apps”, according to the
Eurobarom-
eter on retail financial services and products
from October
2022.
(
71
) See the EBA’s examination programme priorities for
prudential supervisors for 2023. The implementation will
be monitored and covered in the EBA’s 2023 Convergence
Report.
(
72
) See the
European Commission’s monitoring of finan-
cial literacy
from July 2023.
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Contributions to DGSs and RFs decreased
between June 2022 and June 2023, from 1.7%
of banks’ equity to 1.4%. This decrease can be
attributed to both slower growth of covered
deposits across the EEA/EU (2.5% as of end-
2022, compared to 7.4% in 2021 and 8.6% in
2020) but also the coming to an end, by July
2024, of the period of contribution to meet-
ing the minimum target level applicable to
all national DGSs.(
73
) As of end-2022, half of
the 36 EEA DGSs had met their minimum tar-
get level, which in most cases is equivalent
to 0.8% of covered deposits, therefore DGS
contributions are expected to run off till near
extinction in the coming year.(
74
)
Banking taxes are increasing in Europe,
either through increasing profitability or
through other taxes and levies, including
windfall taxes, the latter being set following
the large profits made by the banking sec-
tor. Taxes paid by banks materially increased
by 30% from June  2022 to June  2023; the
overwhelming majority of the increase (91%)
comes from taxes on profits of continuing or
discontinued operations, the remainder from
other taxes and duties. With many more juris-
dictions imposing taxes on the banking sec-
tor following the improvement in profitability,
the overall tax level is bound to increase for
the EU banking sector. This could affect the
profitability outlook of banks and therefore
all these measures need to be duly assessed
from a cost-benefit perspective. Notably, the
introduction of these new measures should
consider whether some characteristics of the
taxes imposed do not entail increased uncer-
tainty for the banking sector (Figure 88).
With regard to operational risk considera-
tions, profitability can, for instance, also be
impacted by rising risk from sanction breach-
es. Notably, the EU/EEA banking sector
should stay alert to the geopolitical unfolding
of events, in order to be able to quickly adapt
to a new environment, be it economic or reg-
ulatory (see also Chapter 6). Finally, looking
further forward, the potential introduction of
central bank digital currencies (CBDCs) may
affect banks’ profitability. This is something
banks should consider when thinking about
developing their business strategies for the
medium-term future.
Figure 88:
Implementation of a bank-specific tax and characteristics in selected countries
Main sources: finance and other ministries, tax and similar authorities and institutions, as well as
central banks, EBA internal data collection among competent authorities, etc.
special “risk tax” measured
by the total balance sheet
of a bank: 5-6bp on liabilities
of banks >EUR 15bn
Corporate tax rate increased
to 26% for financial institutions
30% increase in bank levy
and a new tax on share buybacks
(applicable for all listed companies)
Increase in DGS contributions and
removing the tax deductibility
4.8% on banks’ NII and net
commissions above EUR 800m
(2023 and 2024)
60% tax on NII that is
50% above 4-year average
0.44% of assets less PLN
4bn own funds and treasury bonds
60% tax surcharge on excess profit.
Applies for banks with >6bn CZK NII
Additional 1% tax on turnover
for banking institutions
0.029% on liabilities net equity
and insured deposits
0.21% of total assets net of
interbank loans. In addition,
special tax on turnover is payable
for 2022 and 2023
(10% and 8% respectively)
40%*(NII 2023-110%*NII 2021), not exceeding 0.26%
of RWAs on individual basis. Possibility to allocate
the value as non-available reserves
(
73
) See, for instance, the
EBA’s website on DGS data and
similar
and a 
Single Resolution Board (SRB) blog post on
SRF contributions
from May 2022.
(
74
) See the
EBA’s data update on deposit guaran-
tee schemes across the European Economic Area
from
April 2023.
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Box 7: Deposit pricing when central banks
increase interest rates
Deposits are a  large share of EU banks’
funding items with a large impact on their
profitability (see on funding composition
Chapter  3.1). To better understand recent
and potential developments associated
with deposit costs, this box provides styl-
ised facts about the behaviour of deposit
pricing around episodes of monetary policy
rate increases in the EU over the last two
decades. It also discusses potential drivers
behind deposit pricing during such periods.
Stylised facts about deposit rates in
periods of increasing monetary policy
rates
This box summarises the relationship be-
tween deposit and monetary policy rates
with the deposit beta, which is the cumu-
lative increase in new deposit rates rela-
tive to the cumulative increase in monetary
policy rates over the same period. In gen-
eral, deposit interest rates tend to increase
following monetary policy rate rises in the
EU. However, deposit betas are normally
below one, indicating that banks tend to
only partly pass through such rate rises.
The reaction of deposit rates during mon-
etary policy rate increase episodes differs
by product and counterparty. Deposit be-
tas are in general lower for sight deposits
compared to term deposits. Deposit betas
are also lower for deposits from house-
holds compared to deposits from NFCs
(Figure 89). (
75
)
Figure 89:
Deposit betas of EU banks for past and current policy rate increase cycles
Source: ECB monetary financial institutions interest rate statistics, central banks, IMF
International Financial Statistics (IFS), EBA calculations
Term deposits, households
0.80
0.70
0.60
0.50
beta
0.40
0.30
0.20
0.10
0.00
0 1 2 3 4 5 6 7 8 9 10 11 12
months since cycle start
2022 cycle
Sight deposits, households
0.16
0.14
0.12
0.10
beta
0.08
0.06
0.04
0.02
0.00
0 1 2 3 4 5 6 7 8 9 10 11 12
months since cycle start
2022 cycle
beta
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0 1 2 3 4 5 6 7 8 9 10 11 12
months since cycle start
past cycles
0.00
beta
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0 1 2 3 4 5 6 7 8 9 10 11 12
months since cycle start
past cycles
Sight deposits, non-financial corporations
0.0
Term deposits, non-financial corporations
(
75
) The deposit beta for each month since the start of the central bank policy rate increase episode is calculated as
the cumulative change in the deposit interest rate for new business over the cumulative change in the central bank
policy rate for the same period. The charts show the deposit betas for 12 euro area countries, Bulgaria, the Czech
Republic, Denmark, Poland, Romania and Sweden for 30 monetary policy rate increase episodes over 2000–2023. The
start of a policy rate increase episode was identified when the corresponding central bank policy rate increased and
the end of the cycle was identified when the monetary policy rate decreased. The interquartile range is calculated for
the 12-month cumulative beta.
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When comparing the ongoing monetary
policy increase cycle with past cycles, sight
deposit betas appear to be lagging. Howev-
er, term deposits appear to show a behav-
iour similar to that observed during past
periods of monetary policy rate increases.
Compared to the past periods of increas-
ing policy rates, the country dispersion of
observed deposit betas, measured by the
interquantile range, is considerably lower
during the current policy rate increase epi-
sode (Figure 90).
The lagging sight deposit betas can help
explain the overall slow repricing of depos-
its during the current interest rate increase
cycle. During the past decade, which was
defined by very low and negative interest
rates, the share of sight deposits in the to-
tal deposit mix increased markedly. Addi-
tional analysis shows that during periods of
increasing interest rates the share of term
deposits increases, which also lets the
overall deposit beta accordingly increase.
Figure 90:
Interquartile range of EU deposit betas for past and current central bank policy
rate increase cycles
Source: ECB monetary financial institutions interest rate statistics, central banks, IMF IFS, EBA
calculations
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Term deposits, households
Term deposits,
non-financial corporations
2022 cycle
Drivers of deposit pricing
One of the drivers for deposit pricing and
the reaction of depositors and banks to
increases in monetary policy rates is the
market structure. Betas below one already
indicate the presence of market power in
the deposit market.(
76
) The presence of
market power is presumably key for the
pricing of deposits as it implies that banks
can increase mark-ups on deposits follow-
ing an increase in monetary policy rates.
Market power can stem from market con-
centration but also other factors, such as
consumer behaviour, which can all differ
significantly between Member States.
Over the past 20 years, the number of cred-
it institutions in the EU is on a  downward
trend. Such consolidation helps to improve
banks’ profitability amid rising revenue and
cost synergies. However, in certain cases
(
76
) See Drechsler, I., Savov, A. & Schnabl, P. (2017). The
deposits channel of monetary policy. The
Quarterly Jour-
nal of Economics, 132(4),
1819-1876.
Country interquartile range
Sight deposits, households
past cycles
Sight deposits,
non-financial corporations
this might result in a decrease in consum-
er choice and deposit market competition.
Banks can also leverage on technology
to target the pricing of deposit products
by learning more about their customers’
liquidity needs. Using this informational
advantage, banks can offer more tailored
bundles of banking products to their cus-
tomers. Furthermore, by cultivating their
brand and refining their customer experi-
ence, banks can increase customer loyalty
and decrease the price elasticity of depos-
its. Brand strength could be important in
times of financial uncertainty, as deposi-
tors might resort to banks perceived as
safer, offering a  pricing advantage to the
latter. Something similar could to a certain
degree be seen in the aftermath of the SVB
collapse, when US deposits moved from
smaller to larger banks.
Consumer behaviour is another defining
factor of deposit pricing. Customers tend
to switch their bank rather infrequently.
According to a 2020 survey from the Euro-
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pean Commission, only 7% of households
switched banks in the two years prior to
the survey, a  share lower than for other
services, including other financial ser-
vices such as insurance.(
77
) Customers’ li-
quidity and payment needs influence how
much customers can tolerate a low pass-
through before withdrawing their deposits.
Sight deposits, which are primarily used as
cash-like instruments and are associated
with more convenience and safety com-
pared to cash, offer lower interest rates
compared to term deposits, which forego
some of the convenience of sight depos-
its and are used for longer-term savings
goals. Over the past decade, sight deposits
grew as a share of total deposits, weighing
on the aggregate pass-through from mon-
etary policy to overall deposit rates.
Customers have different degrees of af-
finity with financial markets and products.
Deposit rates for NFCs, which are more
actively involved in managing their balance
sheets compared to households, show con-
sistently higher pass-through compared to
deposits from households. According to
the July 2023 Eurobarometer survey, only
45% of the respondents understand how
compound interest works.(
78
) The higher
beta for NFC deposits is observed across
all monetary policy rate increase episodes
analysed. At the same time, some custom-
ers tend to pay less attention to develop-
ments in financial markets and alternative
options than others, while information on
deposit and alternative offerings might
be costly to find. Furthermore, monetary
policy decisions might not always reach
or be understood by the general public
and thus could fail to affect expectations
about future interest rates and inflation.(
79
)
A  study using ECB supervisory data finds
that household sight deposits have indeed
a significantly higher duration compared to
corporate sight deposits, suggesting that
household deposits are indeed stickier.(
80
)
Nevertheless, recent data about deposit
volumes shows that households and NFCs
are seeking higher remuneration and mov-
ing their resources from sight to term de-
posits. The move is more pronounced for
countries where inflation is higher and
thus the opportunity cost from not seeking
higher remuneration is larger.
Banks’ own liquidity and funding needs
also affect deposit pricing and deposit
market competition. A faster asset side ex-
pansion and higher loan-to-deposit ratios
lead to a higher need for deposits and thus
competition to attract them. Developments
in wholesale markets, such as decreased
demand for bank debt issuance or higher
pricing for that  – as for bank bond mar-
kets any rate change immediately affects
outstanding and newly issued debt  – as
well as more expensive interbank funding,
can force banks to seek out more retail
customer deposits. The latter increases
banks’ incentives to raise deposit rates.
Additionally, new liquidity and funding re-
lated regulation, such as the LCR or the
NSFR, consider deposits as a stable source
of funding and thus incentivise banks to
rely on deposits. However, the weighted av-
erage loan-to-deposit ratio for households
and NFCs is on a  downward trend for EU
banks since 2014, when the coverage of
the EBA supervisory data begins. Further,
banks have improved their liquidity posi-
tion with a  higher share of liquid assets
and more stable funding sources (on LCR
and NSFR trends see Chapter  3.2). At the
current juncture, higher liquidity combined
with relatively subdued loan growth means
that banks face less pressure to compete
at the extensive margin for new deposits.
Balance sheet structure can play a  role
too. If banks hold more fixed-rate assets,
they tend to be reluctant to pass through
a large part of monetary policy rate chang-
es to depositors, provided the latter remain
stable, to protect their NIMs.
At the same time, the deposit market is
highly regulated, which can affect the re-
lationship between monetary policy and
deposit rates. Certain countries regulate
deposit rates or impose ceilings on the
(
77
) See the European Commission’s Market Monitoring
Survey 2020 – Bank accounts.
( ) See
Flash Eurobarometer 525 – Monitoring the level
of financial literacy in the EU,
July 2023.
78
(
79
) See Pinter, J., Kocenda, E. (2017). Media Treatment
of Monetary Policy Surprises and Their Impact on Firms’
and Consumers’ Expectations.
Journal of Money, Credit
and Banking.
The authors show that monetary policy
decisions influence households’ and non-financial cor-
porations’ expectations to the extent that the decisions
are covered by the media. For a  literature summary of
central bank communication with the general public see
Blinder, A. S., Ehrmann, M., De Haan, J. & Jansen, D.
J. (2022). Central bank communication with the general
public: Promise or false hope? NBER Working Paper No
30277.
(
80
) See Hoffmann, P., Langfield, S., Pierobon, F. & Vuil-
lemey, G. (2019). Who bears interest rate risk?
The Review
of Financial Studies, 32(8),
2921–2954.
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deposited amounts.(
81
) Over the past dec-
ade, DGS coverage limits have increased
and became uniform across the EU, while
better-funded DGS funds and resolution
requirements create larger buffers to pro-
tect depositors compared to the past. The
DGS decrease covered depositors’ sensi-
tivity to news about interest rates and af-
fects the price and non-price elasticity of
deposit demand.
An important difference with past tighten-
ing cycles is that the ongoing cycle follows
a period of very low and, in some jurisdic-
tions, negative monetary policy rates and
quantitative easing. Lower pass-through
compared to past monetary policy rate in-
crease cycles could be an effect of the low
starting point. Deposit interest rates were
effectively floored to zero even in jurisdic-
tions where central bank policy rates and
short-term money market rates were in
negative territory. When central bank pol-
icy rates started rising, banks were quick
to eliminate negative interest rates, while
there was a  slowdown in the increase of
fees paid for deposits. As interest rates
remain at higher levels and depositors
continue adjusting their interest rate ex-
pectations, it is likely that more depositors
will become willing to seek out higher re-
muneration for their deposits by switching
their bank, moving to term deposits or opt-
ing for alternatives beyond bank deposits.
Forward-looking considerations
Going forward, there are signals that de-
posit repricing will intensify. Autumn RAQ
results tend to indicate that there is ris-
ing competition for retail deposits. The
responses show that more banks aim to
increase their retail deposits as a  share
of their funding mix (see Chapter 3.1 on
banks’ plans for their funding mix). At the
same time most banks are planning to fur-
ther increase the rates they pay for house-
hold and NFC deposits (see Chapter 5 on
the NIM pressure from deposit repricing).
RAQ results also show that banks expect
deposit betas to remain the lowest for HH
sight deposits (50% expect a beta of 0.1 or
lower). For NFC term deposits nearly 50%
of banks expect a  beta of more than 0.7.
Around 80% of the banks expect the over-
all average deposit beta to be around 0.5 or
lower in the next six to 12 months (Figure
91).
Figure 91:
Banks’ expectations on the level of deposit beta for each of the following portfolios
in the next six to 12 months
Source: EBA Risk Assessment Questionnaire
a) Sight retail deposits
b) Term retail deposits
c) Sight corporate
deposits
d) Term corporate
deposits
e) Overall deposit beta*
0
a) <10%
b) >10% and 30%
10
20
c) >30% and 50%
30
d) >50% and 70%
e) >70%
40
Not Applicable
50
(
81
) For example, the Livret A accounts in France oper-
ate as normal savings accounts. However, the interest
rate is set by the government considering inflation and
there is a maximum allowed deposit amount per person.
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Box 8: Banks’ management and hedging
of interest rate risk
Interest rate risk has been a  key topic for
regulators and supervisors for a long time.
(
82
) Risk management practices and meth-
odologies widely differ across banks and
jurisdictions. An analysis of selected EU/
EEA banks’ disclosures shows that inter-
est rate risk management is mainly done
at balance sheet or portfolio level.(
83
)
Banks’ disclosures refer to gap analysis or
replicating portfolios, the usage of micro
hedges (economic ones, as well as hedge
accounting within the meaning of IFRSs,
for instance), structural hedges, matched
funding of certain loans, and such like. De-
spite banks’ disclosures and elaborations
on interest rate risk management, there
remain certain concerns, which are not
least due to the dispersion among banks’
capabilities to manage this risk. Key con-
cerns tend to be related to banks’ model-
ling assumptions, including behavioural
assumptions of depositors or assumptions
related to prepayment of loans.
IRRBB-related disclosures and data are
one of the key sources for the analysis of
banks’ interest rate risk.(
84
) An analysis
of the impact of a parallel move-up of the
yield curve on the economic value of equity
(EVE) – measured as a share of Tier 1 capi-
tal (T1) – shows that for around 75% of the
banks the overall impact is negative.(
85
) For
the remainder it is positive. This illustrates
the wide dispersion of the EVE impact, and
that banks apply different measures and
approaches when managing and hedging
their interest rate risk. The dispersion is
also driven by different risk appetite among
banks. It furthermore indicates that in gen-
eral banks have hedges or other measures
in place to limit extreme effects in the
event of such rate moves.
Whereas the EVE impact of the upward
rate move is positive for around 25% of the
banks, the NII impact is in contrast positive
for around 75% of them. This is not least
due to the fact that the NII impact does
not consider market value changes and
has a more short-term view (Figure 92). It
needs to be added that there is by nature
also a  risk of suddenly declining rates.
IRRBB data covers this scenario, too. The
results of the parallel downward move-
ment of the interest rate curve are nega-
tively correlated to the parallel upward
movement.
(
82
) On related regulation see the EBA’s
Guidelines on
interest rate risks for banking book (IRRBB) and credit
spread risk arising from non-trading book activities
(CSRBB)
as well as related Regulatory Technical Stand-
ards on the
standardised approach
and the
supervisory
outlier test.
The following analysis covers the interest
rate risk for the banking book as well as related hedging,
with a particular focus on the impact of rate rises (see
Chapter  1 on the rise in interest rates). Such analysis
tends to be very challenging. The key reason is that in-
terest rate risk management can hardly be captured with
reporting data or other quantitative approaches. Qualita-
tive aspects also have to be considered in such analysis.
(
83
) This analysis is based on the disclosures of 30 EU/
EEA banks from different jurisdictions and of different
size.
(
84
) This analysis is based on a  sample of around 165
EU/EEA banks as of year-end (YE) 2022 (QIS data), based
on banks’ internal risk management systems.
(
85
) The underlying assumption is, for instance, a  200
bps parallel move-up of the interest rate curve for EUR.
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Figure 92:
EVE vs. NII impact as a share of T1 capital, from parallel upward movement of the
yield curve (excl. those outside 20% impact)
Source: IRRBB data as reported by selected EU/EEA banks
20.0%
15.0%
NII impact as share of T1
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
EVE impact as share of T1
5.0%
10.0%
15.0%
20.0%
Further analysis of underlying data indi-
cates that fixed-rate assets tend to have
the biggest impact, followed by fixed-rate
liabilities. The impact from floating-rate
assets and liabilities tends to be less sig-
nificant than from fixed-rate positions.
These results imply that the biggest risk
from rate rises comes from fixed-rate as-
sets.
Besides IRRBB disclosures and data, su-
pervisory reporting data also provides
certain indications for banks’ interest rate
hedging, in particular related to interest
rate derivatives. It needs to be stressed
that this analysis can only be limited, as
banks might not need any derivatives for
hedging their interest rate risk, depending
on their asset and liability composition, for
instance.
It should also be noted that accounting-
based information – such as banks’ finan-
cial statements – does not necessarily fully
reflect banks’ hedging. This is because
banks might not designate all derivatives
which are considered in the bank-wide in-
terest rate risk management as hedging
derivatives for accounting purposes, i.e.
as hedge accounting derivatives. However,
for the latter reason supervisory report-
ing data includes information on so-called
economic hedges. These are hedging de-
rivatives that are held for hedging pur-
poses but which, for instance, do not meet
the criteria to be effective hedging instru-
ments within the meaning of the applicable
accounting standards. As such, supervi-
sory reporting data might not fully reflect
banks’ interest rate hedging positions, but
provides at least an indication for the rel-
evance of interest-rate-related derivatives
for hedging purposes, e.g. their relevance
over time, as well as by size class of banks.
Supervisory data indicates that the rel-
evance of interest rate hedging deriva-
tives  – including economic as well as
hedge accounting derivatives  – has risen
YoY, as banks have reported a bigger ratio
of hedging derivatives (notional) relative
to their bonds and loans (book value) as
of June 2023 compared to June 2022. The
analysis also indicates that larger banks
seem to make bigger use of derivatives
for the hedging of interest rate risks than
other banks.(
86
) Small banks, in contrast,
tend to make less use of hedging of interest
rate risk with derivatives (Figure 93). Small
banks also tend to have a  higher share of
economic hedging derivatives, which are
not designated as hedging derivatives for
accounting purposes.
(
86
) This analysis is based on FINREP and a sample of
around 300 banks, to also cover small institutions. The
following analysis sets derivatives’ notionals into rela-
tion to book-value loans, bonds and total assets to make
their usage comparable. This does not imply that interest
rate derivatives solely hedge assets. They can be used
for different purposes, such as hedges of net positions,
assets and liabilities.
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Figure 93:
Interest rate hedge accounting and economic hedge derivatives (notional) as
a share of the sum of book values of bonds and loans at amortised cost (AC) and fair value
through other comprehensive income (FVtOCI), June 2022 (left) and June 2023 (right),
average by size class and overall average as well as overall weighted average (
87
)
Source: EBA supervisory reporting data
Q2 2022
140%
120%
100%
80%
60%
40%
20%
0%
Large banks
Mid-sized
banks
Small banks
Overall
average
Weighted
average
Q2 2023
140%
120%
100%
80%
60%
40%
20%
0%
Large banks
Mid-sized
banks
Small banks
Overall
average
Weighted
average
The latter is similar when measured as
a share of total assets. This applies to in-
terest rate derivatives outside hedge ac-
counting. I.e. these results are similar
when considering all interest rate deriva-
tives including those for economic hedges,
but excluding those that are considered as
hedge derivatives for accounting purposes.
The results also apply to interest rate de-
rivatives that are used for economic hedges
and to interest rate derivatives considered
for hedge accounting purposes (Figure 94).
Figure 94:
All interest rate (IR) derivatives (notional) as a  share of total assets, excluding
those considered as hedge accounting (HA) derivatives within the meaning of the applicable
accounting standards (left), and interest rate (IR) derivatives (notional) as a  share of total
assets for economic hedges and for hedge accounting (HA)
Source: EBA supervisory reporting data
680%
660%
640%
620%
600%
580%
560%
540%
520%
500%
IR derivatives (outside HA)
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
IR derivatives - econ. hedges
Jun-2022
Further considerations of interest rate risk
relate to the valuation impact of rate rises
on banks’ bond portfolios, for instance (see
textbox on debt securities recognised at
(
87
) The cut-offs are EUR 50bn for small banks and EUR
100bn total assets for medium-sized banks.
IR HA derivatives
Jun-2023
amortised cost in Chapter 2.1). Also, depos-
it composition and repricing forms a  key
parameter in interest rate risk manage-
ment (see textbox on deposit pricing when
central banks increase interest rates in
Chapter 5). All these aspects are implicitly
covered by the IRRBB analysis and are not
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least part of banks’ overall hedging strate-
gy. One can conclude that interest rate risk
management and hedging are in place, yet
they vary widely according to size and busi-
ness model. There is wide dispersion of the
impact of interest rate risk management,
and there are not least outliers, which
might be particularly exposed to interest
rate risk especially in an abruptly chang-
ing interest rate environment – whether it
be with a positive or a negative move of the
rate curve.
A key consideration about IRRBB-related
analysis is the validity and realism of the
assumptions behind the underlying pa-
rameters in respective calculations. Mod-
els depend on the applied assumptions,
which need to reflect reality to the best
degree possible and be reliable. This is of
particular relevance in times of compara-
tively big changes of the interest rate en-
vironment, such as the recent migration
from a low or negative rate environment to
relatively high rates within a relative short
time. Such developments presumably
change client behaviour. Having models in
place that are up to date to the specificities
of the banks and of the economic environ-
ment is therefore paramount. Such models
and their underlying parameters need to be
in the focus of regulators and supervisors,
to ensure that respective interest rate risk
management and hedging as well as re-
lated data and disclosures can be trusted.
Within such a volatile interest rate environ-
ment, the management of interest rate risk
and sound hedging practices remain a key
topic not only on regulatory and supervi-
sory agendas but also on banks’ own agen-
das. The EBA’s 2024 European Supervisory
Examination Programme accordingly cov-
ers the topic of interest rate risk and hedg-
ing, including the inherent level of IRRBB,
the impact of changes in interest rates on
NII and EVE, the assessment of modelling
assumptions, and the hedging approaches
and policies and their implementation.(
88
)
(
88
) See the EBA’s
examination programme priorities for
prudential supervisors for 2024.
91
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6. Operational risk and resilience
6.1. Operational risk and
resilience: general trends
The relevance of operational risk and opera-
tional resilience for the banking sector has
grown in the past years. Operational risk
capital requirements account for 9.7% of total
requirements (9.5% in June 2022), and they
are the second most important component
of banks’ risk weights after credit risk. Dis-
persion across jurisdictions is comparatively
low, with only two countries reporting less
than 7%. Beyond operational risks as the risk
of loss resulting from inadequate or failed
internal processes, people, and systems
or from external events, the scope and rel-
evance of operational risk under close scru-
tiny expanded in recent years.(
89
) Financial in-
stitutions and supervisors pay close attention
to conduct-related operational risk, including
anti-money laundering (AML) risk and other
legal risks banks have been increasingly ex-
posed to. In addition, reputation risks remain
high as well. Further to this, the relevance of
operational risk broadened even further with
technological advances, and underlines the
importance of ensuring operational resil-
ience. This is similarly reflected in RAQ re-
sponses, according to which cyber risks and
data security rank the highest of the opera-
tional risks (Figure 95). Risk of ICT failures as
a related risk remains high as well.
Exposure to reputational and operational
challenges, including, for example, business
conduct risk and the risk of financial crime
including risks related to money laundering
and terrorist financing, has not diminished ei-
ther. Banks additionally expect an increasing
risk of fraud, according to the RAQ. Conduct
and legal risks are the second most relevant
drivers of operational risk, at 48% agree-
ment. They have become key operational risk
drivers for banks in the past years (Figure
95), albeit slightly decreasing compared to
last year’s RAQ. Continued high volumes of
legal and redress payments banks have to
render underline the relevance of conduct
and legal risks.
Both fraud and outsourcing risks have in-
creased in banks’ perceptions since last year,
according to the RAQ. Risk of fraud is now
a major driver of operational risk for a third
(34%) of responding banks. It has increased
steadily over time, with 10% agreement in the
autumn 2022 RAQ. Outsourcing risk has also
increased constantly since 2022, with 18%
agreement, in line with increasing outsourc-
ing of banks’ business activities and data.
Heightened geopolitical tensions, but also
continued breaches of AML provisions, re-
quire close attention of financial institutions
and supervisors. Regulators are respond-
ing to these risks by various initiatives, e.g.
by proposing a single rulebook on AML/CFT
that, once adopted, will transform the EU’s
legal and institutional framework for super-
vision in this field.
(
89
) See BIS definition of operational risk in
BIS Principles
for the Sound Management of Operational Risk.
92
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 95:
Main drivers of operational risk as seen by banks(
90
)
Source: EBA Risk Assessment Questionnaire
80%
80%
60%
40%
20%
75%
75%
58%
65%
35% 34%
17% 17%
13% 16%
Sep-2022
Mar-2023
45%
61%
48%
19%
10%
Sep-2023
Mar-2023
Mar-2022
13% 13% 12% 12%
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Mar-2022
Mar-2023
Mar-2022
Mar-2023
10%
Mar-2022
17% 13% 12%
Sep-2022
Mar-2023
Mar-2023
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Mar-2022
Mar-2023
a) Cyber risk and
data security
Mar-2022
b) IT failures
c) Outsourcing
Sep-2023
d) Regulatory initiatives
e) Conduct and legal risk
f) Organisational change
33% 34%
30%
23%
20%
15%
17%
16%
18%
13%
17% 16%
15%
25%
16%
13%
13%
14%
10%
2%
0%
Mar-2022
Mar-2023
Mar-2022
Mar-2023
Mar-2022
Mar-2023
Mar-2022
Mar-2022
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Sep-2023
Sep-2022
Sep-2023
1%
g) Money laudering and
terrorism financing
h) Risk of non compliance with
applicable restrictive measures
regimes (financial sanctions)
i) Fraud
j) Climate and
environmental
risk
k) Other
Operational risk losses are lower compared
to pandemic peaks
At ca. 2.9 million events according to EBA
supervisory reporting data, the total number
of loss events EU banks reported in 2022 re-
mained at a  high level, albeit decreasing by
14% compared to 2021, when banks were still
affected by the impact of the pandemic on
their operations. The number of loss events
further decreased compared to 2020, when
ca. 3.8 million events were reported when
banks were affected by the immediate im-
pact of the pandemic. The number of loss
events in 2022 is again close to the long-term
average as reported in the years before the
pandemic until 2019.(
91
) This reversion might
indicate that banks have strengthened their
operational resilience, including in their re-
sponses to the operational constraints and
challenges of the pandemic.
(
90
) Agreement to up to three options was possible for re-
spondents.
(
91
) The analysis of this and the following figures captures
yearly data.
93
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Figure 96:
Number of new operational risk events over time, 2014–2022 and total losses in
operational risk as a share of CET1(
92
)
Source: EBA supervisory reporting data
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Dec-2014
Dec-2015
Dec-2016
Dec-2017
Dec-2018
Dec-2019
Dec-2020
Dec-2021
Dec-2022
0.00%
2.00%
1.50%
1.00%
0.50%
2.50%
Number of events (LHS)
Total Losses/CET1 (RHS)
(
92
) Gross loss amount from new events and loss adjustments relating to previous reporting periods.
Beyond the number of operational loss
events, the impact of losses related to opera-
tional risk remains high. Total materialised
losses from new operational risk loss events
reached EUR 13.5bn in 2022. While this
amount is significantly lower than reported
during the pandemic in 2021 (EUR 18.7bn), it
is still higher than in the preceding two years.
The continued high volume of new operation-
al risk losses coupled with a high number of
loss events may point to wider distribution
of materialised losses from new operational
risk events across banks. This may be aggra-
vated by lingering cyber risks, and percep-
tions of increased fraud risks which may lead
to additional materialising losses at a  later
stage. High operational risk losses should
accordingly remain an issue of concern for
the banking sector.
The amount of total losses from new opera-
tional risk loss events as a  share of CET1
capital also decreased to 0.9% in 2022, from
1.3% in 2021, when banks’ operations were
still affected by the pandemic. The decrease
of the ratio was largely driven by lower op-
erational risk loss amounts reported in 2022.
The ratio was high at about 1.4% in 2017 and
2018, but was at a  lower level in 2019 and
2020. Recent operational loss figures also
confirm that operational risk and its impact
have remained high even after the additional
operational constraints and challenges of the
pandemic have faded (Figure 96).
Since total operational risk amounts only re-
flect materialised losses from new events,
further future losses might arise. These
might, for example, relate to misconduct
payments, as a consequence of court rulings
and legal settlements, or of IT failures. They
will add in the coming year to losses that have
already been recognised. A  possible mate-
rialisation of the increasing fraud risk that
banks perceive according to the RAQ might
further add to losses. Operational risk events
may not only cause direct financial losses
but might also imply reputational damage,
especially as a  consequence of high impact
events, or events gaining wider public atten-
tion. This may result in decreasing revenues
in the future if a bank exits certain business
areas or faces challenges to retain or attract
customers. It may also result in increasing
liquidity risk if, for example, depositors with-
draw deposits in response to high-impact
operational risk events or investors sell debt
instruments issued by the bank concerned.
Costs might, moreover, indirectly increase
as a result of materialising operational risk,
when higher investments in compliance and
governance, or technology, become neces-
sary, or when risk premia for market-based
funding increase.
Country-by-country data on new operational
risk losses shows that losses are widely dis-
persed. Several jurisdictions reported rela-
tively low loss amounts, while in ten countries
operational risk losses were at about 1% of
CET1 capital or above. This was the case in
only four countries in 2021. It is important
to gain a deeper understanding of drivers of
large divergences in operational risk losses
across countries and banks, and to identify
possible drivers or lessons where losses are
low (Figure 97).
94
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 97:
Total losses in operational risk as a share of CET1, by country, December 2022
Source: EBA supervisory reporting data
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
MT DK PL ES HR HU IE AT CY NL DE LI FR IT SI GR PT LU NO IS SE BE EE LV CZ LT RO BG SK FI EU
Box 9: Major incidents in the EU payments
market(
93
)
Based on the provisions of Article 96 PSD2,
the EBA has been receiving notifications of
major operational and security incidents
affecting payment services by PSPs across
the EEA since January 2018, collecting
more than 17,000 incident reports by the
end of 2022.(
94
) A large part of the incidents
reported in 2022 were of an operational
nature (95%), which includes failures of
processes or systems and events of force
majeure. Fewer than 5% were indicated as
security incidents, e.g. incidents related to
unauthorised access or operations (Figure
98). As regards the impact, most of the in-
cidents affected the availability of services
(91%), while only 7% had an effect on data
integrity and 3% data confidentiality.(
95
)
Figure 98:
Number of major incidents by type
Source: EBA E-Gate, EBA/ECB staff calculations
Security
4.8%
N/A
0.2%
Operational
95.0%
(
93
) The data presented here is taken from ad hoc re-
ports sent to the relevant NCAs by providers of payment
services (PSPs)  – i.e. credit institutions, payment insti-
tutions and electronic money institutions  – in the case
of a  major incident. In order to be classified as major,
an operational or security incident is assessed against
criteria and thresholds articulated in the EBA guidelines
on major incident reporting under PSD2.
(
94
) The following results benefit from previous analysis
of incidents reporting for 2022, which was carried out by
the EBA in close cooperation with the ECB. The following
analysis considers the incidents classified as major and
for which at least one intermediate report was received
(645 incidents).
(
95
) A single incident can impact multiple security as-
pects.
95
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Focusing on incidents causing service
unavailability, the major impact was re-
corded for e-banking and mobile banking
applications, resulting in 300 million and
200 million customer hours of unavailabil-
ity, respectively (Figure 99).(
96
) Incidents in
e-banking/mobile banking were also the
ones that required mostly the activation of
business continuity plans.
Figure 99:
Service unavailability due to major incidents by commercial channels affected
(million customer hours)
Source: EBA E-Gate, EBA/ECB staff calculations
350
300
250
200
150
100
50
0
E-banking
Mobile
banking
ATMs
Point of sale
E-commerce
Other
Branches
Telephone
banking
With regard to the geographical footprint,
around 37% of the major incidents are indi-
cated as having an impact also in other coun-
tries, with 11% appearing to have a broader
impact across the EU, by affecting five or
more Member States. The most frequent root
cause reported is system failure, a trend that
appears to repeat across the years; process
failures and external events also appear to
play a notable role (Figure 100).
Figure 100:
Incidence of the root causes indicated for the major incidents
Source: EBA E-Gate, EBA/ECB staff calculations
400
350
300
250
200
150
100
50
0
System
failure
Process
failure
External
event
Human
error
Malicious
action
Other
131
115
80
38
39
347
Remarkably, only a small part of the major
incidents (4%) was indicated as potentially
cyber-related. In most cases they related
to DoS/DDoS attacks with disruptions con-
tained in less than one day. Some cases of
logical intrusion, malicious code (includ-
ing ransomware) attacks and major fraud
through phishing / fake website campaigns
were also observed.
(
96
) Customer hours are calculated by multiplying ser-
vice downtime in hours by the number of users affected.
96
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A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
6.2. Digitalisation and ICT-
related risks
Digitalisation and the use of ICT at banks and
their customers have become indispensable
and are a  cornerstone of business, as the
digital transformation of the financial sec-
tor continues unabatedly. Banks are seeking
to further digitalise their business, driven by
technological advances, competitive pres-
sure, customer demand and cost saving op-
portunities in the medium term. A large ma-
jority of retail banking and corporate banking
customers are now primarily using digital
channels for their daily banking activities.
Reliance on digital and ICT solutions, includ-
ing outsourcing and ICT third-party arrange-
ments, has resulted in enhanced digital and
cyber risk exposure for banks, including
vulnerability to sophisticated cyber-attacks.
ICT and cyber incidents can affect financial
entities’ operational capabilities to provide
critical and important functions and services
which ultimately might affect financial stabil-
ity. Regulators have responded to cyber risks
with a range of initiatives, such as the Digital
Operational Resilience Act (DORA), intended
to create a  regulatory framework on digital
operational resilience.
ICT and cyber risk level is high
Cyber risk and data security continue to be by
far the most prominent driver of operational
risk for banks, as reflected in 75% agreement
in their responses to the RAQ (Figure 95). As
a related risk, 34% of respondents also point
to ICT failures as a main driver of operational
risk. EU banks moreover reported a  rising
number of new ICT risk events. The num-
ber of about 61,000 IT risk events reported in
2022 was over 20% higher than in 2021. At the
same time the total number of all loss events
of EU banks decreased by 14% in 2022, which
highlights the growing relevance of ICT risk.
Annual reported ICT risk events have in 2022
returned to the levels observed before the
pandemic in 2018 and 2019, after a strong in-
crease in 2020, reflecting the immediate im-
pact of the pandemic (Figure 101).
Figure 101:
Number of new IT risk events over time, 2014–2022 and losses in IT risk events as
a share of CET1(
97
)
Source: EBA supervisory reporting data
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
0.07%
0.06%
0.05%
0.04%
0.03%
0.02%
0.01%
0.00%
Dec-14
Dec-15
Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21
Number of events (LHS)
Total Losses/CET1 (RHS)
Dec-22
In its 2022 Annual Report, the Financial Sta-
bility Board (FSB) highlighted the risk of cy-
ber-attacks on key financial infrastructures,
financial institution(s) or third-party service
providers, subsequently potentially inter-
rupting the provision of financial services
and damaging confidence. The FSB also in-
dicated how the frequency and sophistication
of cyber incidents are growing rapidly, which
could have spill-over effects across borders
and sectors.(
98
)
In addition, geopolitical tensions as well
as digital financial crime are playing an in-
creasing role in the technological and digital
space, with impacts felt across geographies.
Recently increasing geopolitical tensions
may lead to additional cyber and information
security threats, including the risk of DDoS
attacks. Cybercrime, including that which
(
98
) See the FSB report on
Promoting Global Financial Sta-
bility (2022 FSB Annual Report)
from November 2022.
(
97
) Gross loss amount from new events and loss adjust-
ments relating to previous reporting periods.
97
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is allegedly state sponsored, has led to fur-
ther cyber risks, including threats to infor-
mation security and business continuity, as
witnessed, for example, with the Russian ag-
gression against Ukraine.(
99
) For banks and
their customers alike, wider digitalisation of
financial services, increased operational in-
terconnectedness between financial entities
and ICT third-party providers including sub-
contractors, and the reliance on the servic-
es these providers offer have increased the
risks related to the use of ICT technologies,
and in particular the risks related to cyber
incidents. It is therefore of high importance
that banks are well prepared for managing
ICT risks including cyber risk and third-party
risks. Supervisors are required to assess
whether information security measures tak-
en by banks are adequate to mitigate cyber
risk, as expected by the EBA’s 2023 European
Supervisory Examination Programme.(
100
)
Vulnerability to cyber-attacks is unabatedly
high
Indicating a  materialisation of high risks,
more than half of banks noted to have been
victim of at least one successful cyber-attack
in the first half of 2023 in their RAQ respons-
es. The share of banks having been victim of
up to ten successful cyber-attacks stead-
ily increased since the first half of 2022, to
47% in the first half of 2023, while the share
of banks falling victim to 11 or more cyber-
attacks remained broadly stable. These fig-
ures indicate that the scope of successful
cyber-attacks across the banking system
has increased further in spite of further in-
vestments in ICT security infrastructures. Yet
the share of banks falling victim to multiple
cyber-attacks has not increased further in
spite of a  higher risk level and growing so-
phistication of cyber-attacks, which may in-
dicate some overall progress in managing
ICT risks (Figure 102).
Figure 102:
Number of cyber-attacks that resulted or could have potentially resulted in a “major
ICT-related incident” in the last semi-annual assessment period (
101
)
Source: EBA Risk Assessment Questionnaire
55%
50%
40%
30%
30%
20%
10%
0%
Mar-2023
Mar-2023
Mar-2023
Mar-2023
Mar-2023
e) > 50
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
Sep-2022
Sep-2023
52%
46%
47%
41%
3%
1%
1%
5%
2%
4%
7%
4%
2%
a) 0
b) 1 - 10
c) 11 - 20
d) 21 - 50
RAQ responses also suggest that while the
volume and frequency of cyber-attacks as
such are unabatedly high, a large majority of
responding banks (81%) report that they ac-
tually did not face a successful attack which
resulted in an actual major ICT-related inci-
dent. However, this share decreased since
the first half of 2022 (88%). 19% of respond-
(
99
) On, for instance, the increase of state-sponsored cy-
ber-attacks, see the
ECB’s text on a framework for assess-
ing systemic cyber risk
from November 2022.
(
100
) See the EBA’s examination programme priorities for
prudential supervisors for 2023.
(
101
) This relates to an ICT-related incident with a  poten-
tially high adverse impact on the network and information
systems that support critical functions of the financial en-
tity (Article 3(7) DORA).
ents still faced at least one successful cyber-
attack resulted in major ICT incidents (12% in
the first half of 2022).
Publicly available data also indicates a con-
tinued high frequency of cyber incidents im-
pacting the financial sector. For example,
ENISA points to an increase in the volume of
DDoS attacks against financial institutions in
2023.(
102
) The ESRB pointed out a  substan-
tially heightened cyber threat environment
across Europe, referring to an increase in
cyber-attacks and active sabotage of power
and telecommunications infrastructure in
Member States, and to cyber activity re-
(
102
) See
ENISA Threat Landscape, October 2023.
98
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R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
sulting from Russia’s aggression against
Ukraine.(
103
) Similarly, a recent report by the
Basel Committee on Banking Supervision
/ Financial Stability Institute (BCBS/FSI) in-
dicates that ransomware, phishing, online
scams and computer hacking have become
the highest cybercrime threats globally.(
104
) It
also quotes reports suggesting that the costs
of cyber-crime increased strongly, from ca.
USD 8.4tn in 2022 to an estimated USD 11tn
in 2023.
Ongoing investments in ICT security are
required
High vulnerability to cyber-attacks highlights
the relevance of further investments in ICT
and in related security, not least as digitali-
sation and ICT usage will further expand.
Further effort is therefore required at banks
to manage and address ICT security risk.
This includes additional action to counter
cyber-attacks and improve logical ICT secu-
rity, and to ensure that the internal control
framework to manage ICT security risk is
adequate. Yet a  lack of resources, including
skilled and experienced staff, may pose chal-
lenges for further investments in ICT security
infrastructures.
DORA responses to ICT security risks
In response to the growing risk of cyber-at-
tacks and threats, and considering the reli-
ance of EU financial entities on third-party
ICT service providers for the use of ICT ser-
vices to support critical or important func-
tions, strengthening their operational resil-
ience has been one of the key priorities for EU
regulators and supervisors. In January 2023,
DORA came into force, with the purpose of
establishing a comprehensive framework on
digital operational resilience for EU financial
entities and of consolidating and strengthen-
ing the ICT risk management requirements
that have so far been spread over the finan-
cial services legislation (e.g. CRD, PSD2,
MiFID). DORA will apply in January 2025 and
mandates the European Supervisory Author-
ities (ESAs) to prepare jointly a set of techni-
cal standards and guidelines. The first set of
these mandates, which primarily deals with
the requirements for ICT risk management
and third-party risk management, has been
already publicly consulted on and will be fi-
nalised by January 2024.(
105
)
ICT-related incident reporting and an
oversight framework are under preparation
A second set of policy products is expected
to be published for consultation by the end
of 2023 and should be finalised by July 2024.
This set aims to complete the ICT-related in-
cident reporting framework, to provide fur-
ther details on ICT subcontracting and ad-
vanced digital operational resilience testing
(threat-led penetration testing) as well as to
develop supplementary requirements on the
design of an oversight framework. In parallel
with the work on policy-related products, the
ESAs are working together to set up a com-
mon oversight framework whereby they will
assume the role of Lead Overseers for each
critical third-party ICT provider (CTPP) and
receive powers to ensure that CTPPs are ad-
equately monitored at EU level in relation to
the risks they pose to financial entities and
ultimately to financial stability.
DORA furthermore envisages that the ESAs
will establish mechanisms that will enable
the sharing of effective practices to enhance
situational awareness and identify common
cyber vulnerabilities and risks across sec-
tors. These could include tools to enable
the receipt of major ICT-related incidents,
to collect relevant data from the registers
of information and to facilitate the oversight
of CTPPs. To complement DORA provisions,
the ESAs are currently working to implement
ESRB recommendations to start preparing
for the gradual development of an effec-
tive Union-level coordinated response (pan-
European Union Systemic Cyber Incident
Coordination Framework (EU-SCICF)) in the
event of a cross-border major cyber incident
or related threat that could have a systemic
impact on the EU’s financial sector.(
106
)
(
103
) See the ESRB’s report on
advancing macroprudential
tools for cyber resilience
from February 2023.
(
104
) See Crisanto, Pelegrini & Prenio (2023). Banks’ cyber
security – a second generation of regulatory approaches in
FSI Insights on policy implementation No 50 and references
therein.
(
105
) See the
ESAs’ statement that they are consulting on
the first batch of DORA policy products
from June 2023.
(
106
) See the
Recommendation of the European Systemic
Risk Board of 2 December 2021 on a  pan-European sys-
temic cyber incident coordination framework for relevant
authorities (ESRB/2021/17) (europa.eu).
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Box 10: Digitalisation trends at banks
The 2023 RAQ shows that the use of certain
innovative technologies has been consoli-
dated within the banking sector, with more
than 80% of banks using, testing or devel-
oping solutions that use cloud computing,
big data analytics, digital/mobile wallets,
artificial intelligence (including machine
learning and natural language process-
ing) and biometrics. Meanwhile, usage of
testing of and experimentation with DLT or
smart contracts is still limited, with only
22% of banks using DLT. Regarding quan-
tum computing, while few banks report us-
ing it, the testing of innovations involving
quantum computing is starting to pick up
within the banking sector (Figure 103).
Figure 103:
Level of involvement of banks with the application of the selected technologies
(sample size – 85 banks)
Source: EBA Risk Assessment Questionnaire
100
90
80
70
60
50
40
30
20
10
0
2023
Cloud
Computing
2023
Digital/
mobile
wallets
2023
Distributed
ledger
technology
Pilot testing
2023
Big data
analytics
2023
Biometrics
In use / launched
Under development
2023
2023
2023
Artificial
Smart
Quantum
intelligence
contracts
computing
(including ML
and NLP)
Under discussion
No activity
The historical data from the RAQ shows that
while the use of cloud computing and big
data analytics solutions was already con-
solidated within a majority of banks during
the last years, most of the remaining banks
that were still testing these technologies
have moved to actually using them (Figure
104).(
107
) However, data indicates that there
is a certain plateauing of the proportion of
banks actually using, testing or developing
artificial intelligence and machine learning
(AI/ML) solutions. However, this might also
be linked to an extension of the sample of
banks in the RAQ, and not to actual loss of
interest or involvement in AI/ML by banks.
Regarding DLT and smart contracts, there
is a  similar stabilising trend since 2020,
with a  certain level of decrease in the in-
volvement of banks. Nonetheless, around
20% of banks are still testing and develop-
ing DLT and smart-contract-related solu-
tions.
(
107
) For the 2023 RAQ, the sample of banks has in-
creased to 85 banks. To ensure consistency with the 2022
Risk Assessment Report, Figure 104 provides time se-
ries year-on-year comparison based on a static sample.
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R E P O R T
O F
T H E
E U R O P E A N
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Figure 104:
Level of involvement of banks with the application of the selected technologies
(for comparison, based on the adjusted sample)
(108)
Source: EBA Risk Assessment Questionnaire
100
90
80
70
60
50
40
30
20
10
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
2018
2019
2020
2021
2022
2023
Smart contracts
f) Generative
AI
2018
2019
2020
2021
2022
2023
Quantum computing
g) Other
h) Not used /
not planned
to be used
0
Cloud computing
Digital / mobile wallets
Distributed ledger
technology
Big data analytics
Biometrics
Artificial intelligence
(including ML and NLP)
In use / launched
Pilot testing
Under development
Under discussion
No activity
An analysis of the use of AI applications by
banks shows that there are some areas in
which banks are already using such tools
(Figure 105). According to the RAQ, the
most common use cases are profiling and
clustering of clients or transactions (82%
of banks), customer support, including
chatbots (80%), and creditworthiness as-
sessment or credit scoring (74%). Other
significant use cases include, for example,
AML/CFT (for behaviour or transaction
monitoring), fraud detection, optimisation
of internal processes, and risk modelling
not related to regulatory credit risk (e.g.
anomaly detection or sentiment analysis).
While the pickup of AI/ML technology used
by banks may not have been as fast and ex-
tensive as expected, it should be stressed
that this may be related to potential repu-
tational, legal or ethical risks that banks
may face when using AI systems, includ-
ing when those AI systems interact directly
with consumers.
Figure 105:
Applications of AI by banks, differentiated by AI methods and approaches
Source: EBA Risk Assessment Questionnaire
a) Neural
networks
b) Decision c) Regression d) Natural
Trees/Random analysis,
language
Forest
including processing,
gradient
including
boosting
large
language
models
e) Support
vector
machines
a) AML/CFT - Identification and verification (including remote onboarding and digital ID)
b) AML/CFT - behaviour / transaction monitoring
c) Fraud detection
d) Regulatory or supervisory reporting
e) Creditworthiness assessment / credit scoring
f) Monitoring conduct risk
g) Real-time monitoring of payments, including verifying the identification of payers and payees
h) Profiling / clustering of clients or transactions
i) Customer support, including chatbots
j) Optimisation of internal processes
k) Carbon footprint estimation
l) Regulatory credit risk modelling
m) Other risk modelling, including anomaly detection or sentiment analysis
n) Other use cases
1,18%
percent
77,65%
(
108
) For the 2023 RAQ, the sample of banks has in-
creased to 85 banks. To ensure consistency with the 2022
Risk Assessment Report, Figure 104 provides time se-
ries year-on-year comparison based on a static sample.
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An analysis of the AI methods and approach-
es used by banks indicates that banks are
using a wide variety of AI/ML approaches for
the use cases identified above (Figure 106).
The two most common approaches are
the least complex ones, namely decision
trees/random forest (87% of banks) and
regression analysis (86%). However, these
are closely followed by more complex ap-
proaches, like natural language process-
ing (81%) and neural networks (74%), while
the use of so-called generative AI is quickly
increasing, primarily for customer support
(22% of banks) and optimisation of internal
processes (13%). This increasing diversity
and complexity may potentially contribute
to introducing challenges in the supervision
of AI systems used by banks, as well as to
increasing model risk and technology risk
management.
Figure 106:
Banks that use different AI approaches
Source: EBA Risk Assessment Questionnaire
0%
a) Neural network
b) Decision Trees / random forest
c) Regression analysis
d) Natural language processing
e) Support vector machines
f) Generative AI
g) Other
Financial institutions, including banks,
are using diverse explicability techniques
to mitigate the challenges raised by com-
plex ML models, as explained in the EBA’s
follow-up report on the use of ML for IRB
models.(
109
) For instance, the report found
(
109
) See the EBA’s
follow-up report on machine learning
for IRB models
from August 2023.
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
that the most commonly used techniques
are Shapley values (40% of respondents),
followed by graphical tools (20%), en-
hanced reporting and documentation of the
model methodology (28%), and sensitivity
analysis (8%).
6.3.
Financial crime risks
A high number of cases of money laundering
(ML) involving European banks in recent years
has caused substantial reputational damage to
the banking system. ML and terrorist financ-
ing (TF) undermine the integrity of the EU/EEA
banking sector. ML/TF breaches continued to
make headlines in 2023. In 2021, the EC pub-
lished a  comprehensive legislative package
that, once adopted, will transform the EU’s le-
gal and institutional framework. The propos-
als include a single rulebook on AML/CFT and
the establishment of a  central EU authority,
the Anti Money Laundering Authority (AMLA)
to address money laundering and counter the
financing of terrorism (AML/CFT), with direct
supervisory powers. However, ongoing negoti-
ations on the AML/CFT legislative package and
the scale of the proposed reforms have cre-
ated legal uncertainty and hesitation by some
credit institutions to proceed with investments
in their financial crime controls.
Concerns about AML/CFT systems and
controls
From an operational risk perspective, banks
appear to continue to attribute less signifi-
cance to ML/ TF risk than to other operational
risk aspects. Risk awareness, nevertheless,
appears to have increased slightly. 18% of re-
spondents to the RAQ agreed that ML/TF risk
is a main driver of operational risk, compared
to 15% in the autumn 2022 RAQ.
The assessment by AML/CFT supervisors of
both inherent and residual ML/TF risks faced
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by credit institutions was stable between
2021 and 2023, as is detailed in the 2023 EBA
Opinion on ML/TF risks affecting the EU’s
financial sector.(
110
) According to AML/CFT
supervisors’ views expressed in the Opinion,
the sector continues to present “significant
to very significant” ML/TF risks. This is due
both to the significant level of inherent risk in
the sector and to ongoing concerns supervi-
sors have about key AML/CFT systems and
controls, which often are in place, but are not
always effective. For example, credit institu-
tions’ transaction monitoring systems and
suspicious transaction (STR) reporting are
rated as “poor” to “low” by 30% and 36% of
AML/CFT supervisors respectively.(
111
) Man-
(
110
) See the
EBA’s Opinion of the European Banking Au-
thority on money laundering and terrorist financing risks
affecting the EU’s financial sector
from July 2023.
(
111
) See Paragraph 115 of the
EBA’s fourth Opinion on
money laundering and terrorist financing risks affecting the
EU’s financial sector
from July 2023.
agement bodies of credit institutions are also
found to pay insufficient attention to compli-
ance, hampering their operational function-
ality.
Risks associated with restrictive measures
in response to the Russian aggression
against Ukraine remain of highest concern
for banks
Banks confirmed in 2023 a  shift of focus
since 2022 towards risks related to the im-
plementation of restrictive measures in con-
nection with the Russian war of aggression
against Ukraine. Risks related to customers’
transactions received from, or sent to, ju-
risdictions that are subject to international
sanctions are still the most relevant ML/TF
risks for banks, according to the RAQ. 38% of
respondents consider it a  high-significance
risk, and 32% a  significant risk. The Middle
East crisis will further add to this risk.
Box 11: Terrorist financing risks amid the
Middle East crisis
The Middle East crisis has brought back into
focus the risk related to the financing of or-
ganisations that perpetuate terrorist acts.
Hamas has been listed on the EU terrorist
list since 2003 and is subject to freezing of
funds and other financial assets. Available
data shows that Hamas-linked terrorist
organisations have received transfers in
crypto-assets, though the size of individual
transactions was small.
Risk associated with customers whose ac-
tivities or leadership are publicly known to
be associated with terrorism or extremism
is the risk with the lowest significance for
almost half of the banks (46%) according
to the RAQ. Risks associated with custom-
ers transactions received from, or sent to,
jurisdictions where groups committing ter-
rorist offences are known to be operating,
or that are known to be sources of terrorist
financing, represent a risk of medium sig-
nificance for 36% of banks.
According to AML/CFT supervisors, 59%
of financial institutions lack understanding
of terrorist financing risks. 48% of institu-
tions do not adequately monitor transac-
tions for indications of terrorist financing,
and 70% over-rely on the screening of tar-
geted financial sanctions lists instead of
monitoring terrorist financing.(
112
)
The EBA’s ML/TF risk factors guidelines
set out how institutions should identify, as-
sess and mitigate terrorist financing risks
to which they are exposed.(
113
)
(
112
) See the
EBA’s Opinion of the European Banking Au-
thority on money laundering and terrorist financing risks
affecting the EU’s financial sector
from July 2023.
(
113
) See the EBA’s
Guidelines on customer due diligence
and the factors credit and financial institutions should
consider when assessing the money laundering and
terrorist financing risk associated with individual busi-
ness relationships and occasional transactions
from
March 2021.
Most banks consider their internal policies,
procedures and controls for the implementa-
tion of sanctions sufficiently mature, as only
15% of respondents identify risk of non-com-
pliance with applicable restrictive measures
regimes as the main operational risk. At the
same time, banks now consider the risk as-
sociated with customers whose ownership
and control structure are opaque or unduly
complex to be the second most important
ML/TF risk, because individuals targeted by
restrictive measures seek to conceal their
assets. Risk associated with customers
dealing in crypto-assets is also relevant for
banks and is perceived slightly lower than in
2022. According to RAQ responses, payment
and settlement are the only activities where
more banks (56%) identify an increasing ML/
TF risk, even if this represents a decline by 10
p.p. compared to the autumn 2022 iteration
of the RAQ.
Continuous work has been ongoing to ad-
dress ML/TF-related risks. Work on several
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new guidelines under the Regulation (EU)
2023/1113 on transfers of funds and crypto-
assets is intended to foster more effective
risk management practices. Amended ML/
TF Risk Factors Guidelines will be published
by the end of 2023. New guidelines on internal
policies, procedures and controls to ensure
the implementation of restrictive measures
under Regulation (EU) 2023/1113 are also be-
ing prepared.
Initial findings of the reporting to the EBA of
AML/CFT weaknesses
In January 2022, the EBA launched EuReCA.
This database contains information on ma-
terial weaknesses in individual financial in-
stitutions in the EU that competent authori-
ties have identified. Competent authorities
also report to EuReCA measures they have
imposed on financial institutions to rectify
those material weaknesses. Since EuReCA’s
launch, more than 310 reports of serious
AML/CFT deficiencies concerning 113 credit
institutions and more than 180 measures
have been received, which represent around
half of the submissions for the EU financial
sector.(
114
)
The majority of material weaknesses of
credit institutions have so far been related
to weaknesses of customer due diligence
measures (56%), followed by deficiencies in
AML/CFT systems and controls (17%), and
weaknesses in suspicious transaction re-
porting (16%). Looking at the materiality cri-
teria which have triggered the reporting of
identified weaknesses to EuReCA, a  weak-
ness that increases the ML/TF risk exposure
of a credit institution in question is the most
frequent trigger for reporting by both AML/
CFT and competent authorities. A weakness
that has persisted over a significant period of
time (duration criterion) is the second most
frequent trigger.
as ML/TF risks, incl. sanction-related. Con-
cerns about past and potentially continuing
unidentified misconduct persist and include,
for example, facilitated dividend arbitrage
schemes and fines associated with financial
crime (Figure 95).
Beyond reputational damage for the banks
concerned, misconduct costs and other costs
stemming from legal or reputational dam-
age, including from exposures to Russia and
other “rogue states”, have been substantive
for banks concerned. These come in addition
to the operational challenges these banks
have faced. They also indirectly affect banks’
ability to extend lending to the real economy.
Misconduct and identified practices that fa-
cilitate inappropriate or fraudulent business
can, moreover, undermine trust in the bank-
ing system and the proper functioning of the
financial system.
Redress costs from offering unsuitable
advice or similar mistakes are high for
some banks
Redress costs from misconduct have re-
mained high even though few high litigation
and settlement payments, such as those
some large banks faced in the years 2016–
2018, occurred between 2021 and 2023. In
this time period, over a  third of banks re-
sponding to the RAQ (36%) had to pay out
at least 0.5% of their equity in the form of
compensation, redress, litigation and similar
payments. Thereof, 13% of banks paid out at
least 2% of their equity in the form of such
payments. 6% of banks paid out a high share
of over 4% of their equity (Figure 107).
Compared to the 2022 RAQ, the share of
banks having to pay out at least 0.5% of their
equity in the last three years decreased. But
the share of banks having to pay out a  high
share of their equity in the form of redress
costs has grown. In the 2022 RAQ no bank
indicated having paid out over 4% of their eq-
uity, compared to 6% in autumn 2023. This
indicates that some banks were affected by
substantially higher redress costs this year
than in 2022. Observations that over a third of
banks had to pay out at least 0.5% of their eq-
uity additionally show that elevated litigation
costs are not only confined to a  few banks
but affect a  wider share of European banks
across geographies.
6.4. Further legal and
reputational risks
Conduct and legal risk continues to be the
second most relevant operational risk to
RAQ respondents, and its relevance remains
high with 48% of RAQ respondents consider-
ing it as the main operational risk. Legal and
reputational risks go beyond those related to
digitalisation and ICT-related risks as well
(
114
) On EuReCA data see also the overview of the main
risks and vulnerabilities in the EU banking sector in the
EBA’s Risk Dashboard,
editions for
Q1 2023
and
Q2 2023.
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Figure 107:
Total payments for redress costs in the past three years as % of equity
Source: EBA Risk Assessment Questionnaire
0%
a) 0% and <0.25%
b) 0.25% and <0.5%
c) 0.5% and <1%
d) 1% and <2%
e) 2% and <3%
f) 3% and <4%
g) >4%
Data indicates that banks substantially low-
ered their provision for legal and conduct
risk in 2022. Net changes in provisions due
to pending legal issues and litigation meas-
ured as a  share of total assets were at ap-
prox. 1.2 bps in December 2022 substantially
lower than in December 2021 (at approx. 2
bps), but at a comparable level to December
2020 (at approx. 1.1 bps). Considering that the
relevance of conduct and legal risk as the
second most important driver of operational
risk, according to the RAQ (48% agreement),
lower net changes in provisions due to pend-
ing legal issues and litigation are an issue
of concern. It will be important that banks
adequately reflect pending legal issues and
litigation in their provisioning policies (Figure
95 and Figure 108).
10%
20%
30%
40%
50%
60%
Figure 108:
Net provisions for pending legal issues and tax litigation as a share of total assets by
country (2022) and for the EU (2020–2022)
Source: EBA supervisory reporting data
0.20%
0.15%
0.10%
0.05%
0.00%
-0.05%
-0.10%
Dec-2020
Dec -2022
Dec -2021
AT BE BG CY CZ DE DK EE ES FI FR GR HR HU IE IS IT LI LT LU LV MT NL NO PL PT RO SE SI
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6.5. Outlook of continued high
operational risk
Going forward, various factors support an
outlook for a  continued high level of opera-
tional risk. Subdued economic prospects
and heightened geopolitical tensions provide
a  backdrop for continued high operational
risk. This includes possible losses from
fraudulent activities and a potential opportu-
nity for the emergence of new types of mis-
conduct. A high level of cyber risk is moreo-
ver not showing indications of abating, and is
aggravated by geopolitical tensions. Cyber
risk may also increase further in line with
technological advances. Reputational risks
also remain high.
Some indications give additional concerns
that further banks may be impacted by op-
erational risk in 2023 and beyond. Risk per-
ceptions for the main drivers of operational
risk are high, while geopolitical tensions and
their potential implications for banks may
result in further operational challenges.
Also, net changes in provisions for pending
legal issues have decreased, while materi-
alised operational risk amounts are high. It
is therefore important that banks and super-
visors give high priority to operational risk.
They should stay vigilant in times of economic
and geopolitical uncertainty, strengthen their
monitoring of business conduct and opera-
tional risk, and ensure adequate provisioning
for operational losses.
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7. Retail risk indicators
Article 9(1) of Regulation (EU) No 1093/2010
requires the EBA to develop retail risk indica-
tors (RRIs) for the timely identification of po-
tential consumer harm. For this purpose, the
EBA is publishing a list of 11 RRIs that covers
a  wide variety of different types of products
in the EBA’s remit (e.g. mortgage credit, con-
sumer credit and payment accounts).(
115
) The
indicators aim to facilitate the monitoring of
the banking markets across the EU/EEA by
measuring the risk of detriment arising to
consumers from the misconduct of the insti-
tutions, and from wider economic conditions.
They provide information that help the EBA
and national competent authorities to priori-
tise their regulatory and supervisory work in
the area of consumer protection but may be
of interest to other, external stakeholders as
well (Figure 109). An explanation of the meth-
odology for the calculation of the RRIs, in-
cluding related data limitations, can be found
on the
website.(
116
)
Figure 109:
EBA retail risk indicators (summarising overview)
Source: EBA supervisory reporting data, payment fraud reporting data, World Bank
Product
category
Name of indicator
Share of household loans with forbearance measures
over total household loans
Share of NPLs collateralised by immovable property
over total loans collateralised by immovable property
Share of NPLs from credits for consumption over total
credits for consumption
Percentage of deposit interest expenses paid by banks
to households over total household deposits
Indicator
number
MC1
Value – EU/EEA
average
1.5% (1.7%)
Reference period
30/06/2023
(30/06/2022)
30/06/2023
(30/06/2022)
30/06/2023
(30/06/2022)
30/06/2023
(30/06/2022)
2022
I. Mortgage
credits
MC2
OCL1
PDA1
1.5% (1.5%)
5.2% (5.3%)
0.5% (0.2%)
II. Other con-
sumer loans
III. Payment
and deposit
accounts
IV. Credit &
debit cards
Share of fraudulent card payments over total card
payments (in terms of volume and value of total
transactions)
Change to previous year of the fraud losses borne by
card payment users
Share of fraudulent credit transfer payments over total
transfer payments (in terms of volume and value of
total transactions)
Change to previous year of the fraud losses borne by
consumers (credit transfers)
The percentage of people aged 15+ who have an ac-
count at a bank or another type of financial institution
0.02%
CDC1
0.03%
CDC2
49%
0.0026%
0.0006%
OPI2
AFS1
AFS2
AFS3
64%
86%/89%/91%/92%
74%/78%/84%/85%
13%/16%/15%/15%
2022
Difference between
2021 and 2022
2022
2022
Difference between
2021 and 2022
2011/2014/2017/2021
2011/2014/2017/2021
2011/2014/2017/2021
V. Other
payment
instruments
OPI1
VI. Access
to financial
services
The percentage of respondents aged 15+ who report
having a debit or credit card
The percentage of respondents aged 15+ who report
borrowing any money from family, relatives, or friends
in the past year
(
115
) The 11 indicators were selected by the EBA from an ini-
tial long list of 50 indicators, the suitability of each of which
was assessed by the EBA against criteria such as measur-
ability, data availability, data accuracy, implementation cost,
geographical representativeness, and actionability.
(
116
) See the
EBA Retail Risk Indicators.
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Mortgage credits and other consumer loans
For mortgage credit and consumer loans,
the EBA’s RRIs capture the risks to consum-
ers by measuring consumers’ ability to repay
their loans. Overall, respective indicators
point to improvements in consumers’ ability
to repay loans, especially in Member States
with the highest proportion of such loans.
However, the data should be interpreted cau-
tiously and seen in the wider context of the
economic situation in a  given Member State
and the EU/EEA.
The share of loans with forbearance meas-
ures aims to also assess the access of con-
sumers to forbearance measures. In gener-
al, a decrease of this ratio may indicate that
consumers experience detriment because
their access to forbearance measures is low-
er over time. Though it may also be the case
that the indicator decreases because of the
overall strength of the economy and fewer
customers requiring forbearance measures,
or transitioning from a period in which higher
levels of forbearance measures were needed
to one in which fewer measures are neces-
sary.
Between June 2022 and June 2023, the share
of household loans with forbearance meas-
ures over total household loans decreased
from 1.7% to 1.5% across the EU/EEA. The
fall was significant in Member States with
comparatively high level of such loans  –
Greece, Cyprus, Hungary, as well as Bulgar-
ia, and Ireland. The proportion of such loans
increased in just four Member States (Fin-
land, Poland, Norway and Sweden) and in all
these cases the increases were not material.
The share of non-performing loans collat-
eralised by residential immovable property
aims to measure whether consumers face
difficulties to make their mortgage pay-
ments. In general, a decrease of this ratio in-
dicates that consumers’ financial situation is
improving. However, it may also be the case
that over time the indicator could for instance
decrease if banks change their business
model and/or limit providing mortgage prod-
ucts to certain consumers, and/or dispose of
such loans.
Between June 2022 and June 2023, the share
of NPLs collateralised by immovable proper-
ties over all such loans remained largely sta-
ble at 1.5% across the EU/EEA. Among the
Member States where the ratio decreased,
the most significant falls were observed in
Hungary, Ireland, Bulgaria, Lithuania, Bel-
gium and Liechtenstein. The only countries
where the proportion of such loans increased
noticeably were Poland and Sweden (Figure
110).
Figure 110:
Share of household loans with forbearance measures over total household loans
(indicator MC1; left) and share of non-performing loans collateralised by residential immovable
property over total loans collateralised by residential property (MC2; right), both indicators as of
June 2022 and June 2023
Source: EBA supervisory reporting data
18.0%
17.0%
16.0%
15.0%
14.0%
13.0%
12.0%
11.0%
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
EL
CY
HU
PT
BG
ES
IE
IT
AT
HR
IS
EEA weighted avg.
FI
SK
MT
PL
NL
EE
LV
CZ
FR
BE
RO
LU
LT
DE
SI
DK
LI
NO
SE
10.5%
10.0%
9.5%
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Jun-2022
The share of non-performing consumer loans
aims to proxy whether consumers face diffi-
culties to repay their loans other than mort-
gages. In general, a decrease of this ratio in-
dicates that consumers’ financial situation is
Jun-2023
improving. However, it may also be the case
that over time the indicator could decrease if
banks change their business model and/or
limit providing loans to certain consumers,
and/or dispose of such loans.
108
CY
EL
HU
IE
BG
HR
ES
PL
MT
FR
RO
SI
IT
EEA weighted avg.
AT
PT
LU
DK
SK
LI
LT
FI
BE
NL
DE
CZ
LV
IS
EE
NO
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R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
The share of NPLs from credits for consump-
tion has remained largely stable between
June 2022 to June 2023 at about 5.2%. The
proportion of such NPLs decreased the most
in Greece, Hungary, Bulgaria, Norway and
Denmark, while increasing the most in Liech-
tenstein and Lithuania, albeit from among
the lowest levels in the EU/EEA (Figure 111).
Payment and deposit accounts
For payment and deposit accounts, the
EBA’s RRIs capture the risks to consumers
by measuring the profitability of holding de-
posits. The percentage of deposit interest
expenses paid by banks to households over
total household deposits measures the costs
of holding deposits for banks, and in turn,
the benefit to consumers. In general, a  de-
crease of this ratio would mean that
ceteris
paribus
holding deposits is less profitable for
consumers. On the other hand, an increase
would mean that
ceteris paribus
consumers
are benefiting more from holding their de-
posits at a bank.
Between June 2022 and June 2023, the ratio
increased from 0.2% to 0.5% indicating that
deposits are more profitable for consumers.
The increase was noticeable in most Member
States, and particularly so in Liechtenstein
and the Nordics (Figure 111).
Figure 111:
Share of non-performing loans from credits for consumption over all loans from
credits for consumption (OCL1; left) and percentage of deposit interest expenses paid by banks
to households over total household deposits (PDA1; right), both indicators as of June 2022 and
June 2023
Source: EBA supervisory reporting data
14.5%
14.0%
13.5%
13.0%
12.5%
12.0%
11.5%
11.0%
10.5%
10.0%
9.5%
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
EL
CY
HU
BG
PL
RO
SK
MT
AT
PT
FR
ES
DK
EEA weighted avg.
HR
CZ
NL
IE
NO
IT
DE
SI
BE
FI
SE
LT
LU
IS
EE
LV
LI
2.30%
2.20%
2.10%
2.00%
1.90%
1.80%
1.70%
1.60%
1.50%
1.40%
1.30%
1.20%
1.10%
1.00%
0.90%
0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
IS
FR
CZ
HU
NO
ES
EEA weighted avg.
RO
AT
NL
DE
PL
LI
BE
PT
MT
IT
LU
SI
DK
HR
LT
SE
IE
EE
EL
FI
SK
CY
LV
BG
Jun-22
Payment services
For payment services, some of the risks to
consumers are captured by measuring the
ratio of fraudulent payments and the losses
borne by consumers as a result of fraud.(
117
)
The share of fraudulent card payments aims
to measure the share of fraudulent transac-
tions in the total volume and value of card
payments. An increase of this ratio would in-
dicate that consumers are more exposed to
fraud in the context of their card payments. In
2022, 0.015% of card payments in the EU/EEA
were fraudulent and ranged from 0.03% in
France and Estonia to close to zero in Poland,
(
117
) The figures presented here are elaborated from statis-
tical data on fraud relating to different means of payment
that, according to the provisions of Article 96 PSD2, are sent
to the EBA and the ECB by the NCAs based on the fraud
data reported by their respective providers of payment ser-
vices (PSPs)  – i.e. credit institutions, payment institutions
and electronic money institutions.
Jun-23
Lithuania, Finland and Sweden. The value of
fraudulent card payments compared to the
total value of card payments was 0.027% in
the EU/EEA. In two Member States – Estonia
and the Netherlands – the value of fraudulent
payments exceeded 0.05%.
Another indicator considered is the share of
fraudulent credit transfer transactions in the
total volume of such payments. An increase
of this ratio may indicate that consumers are
more exposed to fraud in the context of their
use of credit transfers.
109
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In 2022, 0.026% of credit transfers in the
EU/EEA were fraudulent and the proportion
ranged from 0.009% in the Netherlands to
close to zero in Iceland and Croatia. The value
of fraudulent credit transfers as a proportion
of the value of all such transfers was 0.0006%
in the EU/EEA in 2022. Putting these two fig-
ures together, it becomes clear that in some
Member States, while the volume is high, the
value of such fraudulent transactions is low,
while in others the value is significantly high-
er compared to the volume (Figure 112).
Figure 112:
Share of fraudulent card payments over total card payments (CDC1)  – value and
volume  – 2022 (left) and share of fraudulent payments over total payments (credit transfers)
(OPI1) – value and volume – 2022 (right)
Source: EBA supervisory reporting data
0.0800%
0.0700%
0.0600%
0.0500%
0.0400%
0.0300%
0.0200%
0.0100%
0.0000%
EE
NL
FR
SI
LU
ES
AT
BE
IE
IS
BG
CZ
HU
Weighted average - EU sample
HR
EL
NO
DE
DK
MT
RO
PL
IT
SK
PT
LV
CY
FI
SE
LT
0.0100%
0.0090%
0.0080%
0.0070%
0.0060%
0.0050%
0.0040%
0.0030%
0.0020%
0.0010%
0.0000%
NL
BE
LU
LT
IE
EL
Weighted average - EU sample
ES
CZ
AT
DE
MT
FI
PL
FR
LV
HU
IT
SE
EE
PT
DK
BG
CY
SK
RO
NO
SI
HR
IS
Share of fradulent credit transfers over all credit transfers - volume
Share of fraudulent credit transfers over all credit transfers - value
Share of fraudulent card payments over all card payments - volume
Share of fraudulent card payments over all card payments - value
Furthermore, changes to the number of
losses due to fraud that are borne by card
payment services users are also monitored.
A positive value of the indicator indicates an
increase in losses to the consumer from one
year to the next, while a negative value of the
indicator indicates a decrease in losses to the
consumers. However, the figure needs to be
interpreted with caution because changes to
the volumes of transactions impact the indi-
cator. Moreover, in the case of a very limited
aggregate value of the fraudulent transac-
tions, this indicator is sensitive even to small
variations, in absolute terms, in the losses
borne by the card payment service users over
the reference periods.
The absolute value of losses due to fraud
borne by card payment services users in-
creased by 49% from 2021 to 2022 in a sam-
ple of 18 Member States for which the EBA
has data for both years. However, particularly
for that indicator, the quality of the data re-
quires further improvements and thus re-
sults should be interpreted carefully.
Data shows a  potential increase during the
past year in the amount of losses due to fraud
that are borne by the users of credit trans-
fers. A positive value of the indicator indicates
an increase in losses to the consumers from
one year to the next, while a  negative value
of the indicator would indicate a decrease in
losses to the consumers. However, the figure
needs to be interpreted with caution because
significant changes to the volumes of trans-
actions impact the indicator. Moreover, in
the case of a very limited aggregate value of
the fraudulent transactions, this indicator is
sensitive even to small variations, in absolute
terms, in the losses to the consumers over
the reference periods.
Between 2021 and 2022, the absolute value
of losses due to fraud borne by credit trans-
fer users increased by 64% in a sample of 20
Member States for which the EBA has data
for both years. However, particularly for that
indicator, the quality of the data requires fur-
ther improvements and thus results should
be interpreted carefully (Figure 113).
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A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Figure 113:
Change to previous year of the fraud losses borne by card payment users (CDC2) –
from 2021 to 2022 (left) and change to previous year of the fraud losses borne by consumers
(credit transfers) (OPI2) – 2021 to 2022 (right)
Source: EBA payment fraud reporting data
500% 469%
400%
500%
400% 388%
356%
263%
190%
167%
135%
112% 98%
300%
300%
216%
177%
126%
96%85%
64%59%53%
38%26%
19%18%
200%
200%
83% 81%
49% 42% 40%
14%
0%
-8%
-24% -25%-27%
-31%
100%
100%
6% 5%
-15%-18%
-31%-39%
-49%
-71%
0%
-100%
DE
SK
LU
MT
HU
ES
BE
HR
PT
DK
EU weighted average
EL
BG
SE
IE
LV
IT
RO
EE
-100%
Access to financial services
Concerning access to financial services, the
EBA RRIs include three indicators based on
World Bank data – the percentage of people
aged 15+ who have an account at a  bank or
another type of financial institution, those
who report having a debit or credit card, and
those who report borrowing any money from
family, relatives or friends in the past year.
One indicator shows the percentage of peo-
ple aged 15+ who report having an account
at a bank or another type of financial institu-
tion or report personally using mobile mon-
ey services in the past year. The higher the
figure the higher the proportion of the adult
population with access to the most basic fi-
nancial service. The latest data available is
for 2021 and shows that on average in the EU/
EEA 96% of people had a bank account, with
very close to 100% in more than half of EU/
EEA states, and only Romania, Bulgaria and
Hungary below 90%.
Another indicator is the percentage of people
aged 15+ who report having a debit or a credit
card. The higher the figure the higher the pro-
portion of the adult population with access to
such payment services. In 2021, on average
87% of people aged 15+ had a debit or credit
card in EU/EEA Member States, with close to
100% in many states in the north of the EU/
EEA, and figures below 70% in Romania and
Croatia (Figure 114).
Figure 114:
Percentage of people aged 15+ who have a  bank account (AFS1)  – 2021 (left) and
percentage of people aged 15+ who have a debit or credit card (AFS2) – 2021 (right)
Source: World Bank
2021
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
DK
IS
DE
AT
NL
SE
IE
FI
NO
EE
FR
SI
BE
ES
IT
LV
MT
PL
SK
EEA unweighted average
CZ
EL
LT
CY
PT
HR
HU
BG
RO
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
DK
NL
SE
NO
FI
EE
SI
AT
BE
IS
DE
IE
SK
MT
CZ
LV
EEA unweighted average
FR
PT
PL
ES
EL
IT
CY
HU
LT
BG
HR
RO
2021
NO
EL
NL
DK
HU
SK
EU weighted average
BE
SE
PT
FI
EE
HR
LV
LU
BG
RO
IE
ES
IT
MT
111
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Finally, the percentage of people aged 15+
who report borrowing any money from fam-
ily, relatives or friends in the past year is an-
other RRI considered here. A  higher figure
may indicate that fewer people have access
to loans from financial institutions, and thus,
resort to borrowing from family, relatives
or friends. A higher figure may also indicate
that the costs of borrowing have increased,
making it less affordable to use financial ser-
vices. In 2021, on average 15% of people have
borrowed money from family, relatives or
friends across the EU/EEA, with more than
25% in Bulgaria, Greece and Romania, and
less than 10% in Portugal and Italy (Figure
115).
Figure 115:
Percentage of people aged 15+ who borrowed from family or friends (AFS3) – 2021
Source: World Bank
35%
30%
25%
20%
15%
10%
5%
0%
BG
EL
RO
IS
CY
PL
NO
DK
HR
SI
LV
EE
EEA unweighted average
SK
DE
AT
FI
CZ
MT
BE
SE
HU
LT
ES
FR
NL
IE
PT
IT
2021
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R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
8. Policy implications
and measures
Uncertainty around the macroeconomic
environment outlook and geopolitical risks
remain elevated.
Current interest rate lev-
els challenge economic growth, and as long
as inflationary pressures persist monetary
policy is not expected to loosen, yet the tra-
jectory of interest rate levels remains highly
uncertain. Economic growth is also chal-
lenged by high geopolitical risks. The US
banking turmoil in March and the develop-
ments related to CS showed that banking is
also based on trust and should such trust be
impaired banks can suddenly be challenged,
materialising through funding, liquidity and
other risks. The March banking turmoil in the
US also showed how only some banks, that
are not considered systemically important,
can negatively affect the worldwide banking
sector. Banks and supervisors need to re-
main vigilant and flexible, to react quickly to
a changing monetary and economic situation,
to events challenging the banking sector as
such and to geopolitical developments.
Slow loan growth can have long-term eco-
nomic effects.
Central banks’ monetary
policy tightening, to tackle inflationary pres-
sures, has affected demand for loans. At the
same time, banks are tightening their credit
standards due to fading risk appetite as a re-
sponse to macroeconomic uncertainty. Such
developments may have long-term economic
effects, as the economy is not adequately fi-
nanced to support its growth. It is important
that banks ensure credit is provided to the
economy also in times of elevated uncer-
tainty, adequately assessing and pricing risks
when providing new financing.
There is a rising probability of a deteriora-
tion in credit risk.
The broad expectation is
that the increase in interest rates, along with
inflationary pressures and stagnant econom-
ic growth, may affect asset quality negatively.
The slow rise in past-due loans and the rise
of NPL inflows over outflows gives an indica-
tion that asset quality improvement may have
come to an end. Banks need to be alert and
aware of the potential economic and other
challenges in their evaluation of credit risk. It
is equally vital to identify and deal with trou-
bled borrowers and loans promptly, to en-
sure sufficient provisioning, including timely
loss recognition and proactive measures
such as forbearance.
Forbearance measures should be used pru-
dently.
To ease the effect of sudden interest
rate hikes, especially on mortgage borrow-
ers that are at risk, various specific support
measures have been implemented. As in
the pandemic, a  rising number of countries
have implemented moratoria or interest rate
subsidies to deal with the consequences of
rising rates or high inflation. These meas-
ures can be of a  mandatory or a  voluntary
nature. They may involve limits on interest
payments, breaks from payments, waiving
of penalty fees for overdue loans and simi-
lar measures. Whenever any forbearance is
used, banks must ensure that they still prop-
erly assess the credit risk of each borrower.
Banks should look at each case individually
and choose the most appropriate forbear-
ance measures for each borrower.
Geopolitical tensions could adversely affect
banks’ business models.
Such tensions have
challenged some banks with a  global pres-
ence or heightened exposures to non-EEA
counterparties. Banks with such exposures
have to be particularly vigilant in managing
them, and to be flexible to react within the
short term to unexpected developments,
such as sanctions or measures that might,
for instance, require a  sudden reduction of
specific exposures or even a withdrawal from
a country.
Risks related to transactions from/to sanc-
tioned jurisdictions or counterparties are
among the most relevant ML/TF risks for
banks, according to RAQ results.
Sanc-
tions that were put in place extensively as
a  response to Russia’s aggression towards
Ukraine need to be followed closely and im-
plemented accurately, to avoid potential con-
duct or legal risks. Banks should also ensure
that robust customer due diligence meas-
ures are in place to mitigate any potential
misuse of banking services and transactions
by facilitators of terrorist financing.
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Banks are expected to continue their efforts
to develop approaches to managing ESG
risks with a  view to integrating forward-
looking information.
As banks may be ex-
posed to ESG risks through their respective
counterparties and assets, it is important
that they identify, assess, monitor and man-
age these risks. The development of method-
ologies to identify how and to what extent ESG
risks translate into financial risks should re-
main a  priority for banks. Particularly as
historical information alone is not sufficient
to capture climate-related financial risks,
banks should complement the available in-
formation with forward-looking methodolo-
gies. The use of scenario analysis and tran-
sition plans can support banks in identifying
the relative riskiness of sectors and assets
under different climate-related pathways, as
well as in assessing the alignment of coun-
terparties with different transition scenarios.
Interest rate risk needs to be managed pru-
dently.
Comparatively substantive changes
in the interest rate environment happened
within a  relatively short time. Such a  devel-
opment not only affects fair values of debt se-
curities with either a direct impact on banks’
P&L or equity or an indirect impact on unre-
alised losses for debt securities at amortised
cost. It also affects the management of inter-
est rate risk more generally, including hedg-
ing effectiveness. In an uncertain interest
rate environment, the management of inter-
est rate risk and sound hedging practices re-
main a key concern. These risks include the
validity and realism of the parameters used
in banks’ models and scenarios to manage
their interest rate risk and hedging. Banks
also need to be prepared for a potential sud-
den decline in interest rates, in case of cur-
rently unforeseen events.
Deposit volume dynamics have become more
important.
For more than a  decade, banks
had access to rather stable funding through
growing volumes of deposits. The sudden
increase in interest rates has changed the
landscape as customers are seeking higher
remuneration for their deposits. The change
in depositors’ behaviour, along with tech-
nological advances in banking, may further
facilitate movements in deposits. The social
media effect and the impersonal use of in-
ternet banking have changed the traditional
interaction and relation between depositors
and banks. This was also proven during the
US banking turmoil in March 2023, in which
deposits moved unprecedentedly fast. Close
monitoring of deposit flows is not only war-
ranted, but banks and supervisors should
explore new forward-looking ways to moni-
tor and anticipate liquidity trends, including
the subsequent following of social media in-
teractions, and to apply measures to react
to those. Banks and supervisors should also
monitor deposit composition, ensuring that
their funding from deposits is diverse and not
overly exposed to particular counterparties
or sectors. Looking further ahead, the poten-
tial introduction of CBDC, such as the digital
euro, might additionally affect banks’ deposit
funding.
Banks aim to increasingly focus on depos-
it-based funding going forward.
This might
become challenging to attain for the bank-
ing sector while deposit volume growth is
slowing down. It could presumably increase
the pricing pressure on deposits, which will
negatively affect banks’ NIMs, especially for
those overly reliant on deposit funding that
have so far benefited from low deposit betas.
In such an environment it remains particu-
larly important that banks maintain a healthy
funding mix, including their continued access
to debt markets. Sustainable business mod-
els are also paramount for EU/EEA banks to
remain competitive at a global scale.
Resolvability of institutions should be a pri-
ority.
Loss-absorbing capacity is not the
only factor that matters for resolvability and
banks have to keep advancing on all aspects
of resolvability. The March banking turmoil
has demonstrated that loss-absorbing ca-
pacity may not be sufficient for resolvability.
Banks and supervisors have to make sure
they can facilitate the execution of the opti-
mal resolution plan.
Financial market turmoil, geopolitical risks,
terrorist attacks, pandemics and other un-
foreseen developments can suddenly nega-
tively affect the banking sector or individual
institutions.
Banks need to be prepared for
crisis events and should also have credible
recovery plans in place that feasibly address
such risks. Plans for crisis events and recov-
ery plans have to be based on realistic as-
sumptions and should be flexible enough to
address unforeseen events, including worst-
case scenarios of, for example, further armed
conflicts and terrorist attacks. With regard to
vulnerabilities from financial market turmoil
and potential spill-over from other sectors,
banks’ NBFI interlinkages need to be moni-
tored closely, including for instance step-in
and similar risks.
Windfall taxes have been introduced in many
EU/EEA jurisdictions.
They have resulted in
negative reactions on equity markets as they
significantly increase uncertainty for inves-
tors in the banking sector. This may negative-
ly affect banks’ payout ratios, which also tend
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2818821_0117.png
R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
to be affected by investors as well as banks’
ability to raise capital. Windfall taxes should
not compromise banks’ long-run viability.
The introduction of such measures should
also consider whether some characteristics
of the taxes imposed do not entail increased
uncertainty for the banking sector.
ICT and cyber-related risks are unabat-
edly high and should remain a  focus area
of banks.
They need to be prepared for any
impact on their ICT systems as well as major
cyber-attacks. The latter might not only af-
fect their individual institutions but might be
aimed at paralysing the banking or financial
system as a whole. Banks also need plausi-
ble plans to be able to react to such events,
including implications for their outsourcing
providers. Banks should moreover prepare
for the DORA implementation, and ensure
they have appropriate resources, skills, ca-
pabilities and governance arrangements in
place to address the challenges posed by
ubiquitous use of ICT services. With regard
to issuers of crypto-assets, financial institu-
tions and other undertakings with asset-ref-
erenced or electronic money token activities
are encouraged to prepare for the Markets
in Crypto-assets Regulation (MiCAR) already
prior to its application date.
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2818821_0118.png
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Annex I: Samples of banks
List of banks that made up the sample population for the risk indicators, the transparency
exercise and the RAQ: (
118
)
2023
Transparency RAQ 2023
Exercise
X
X
X
X
X
X
X
X*
X*
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X*
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Name
Country
Risk
indicators
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
BAWAG Group AG
Erste Group Bank AG
Raiffeisen Bank International AG
Raiffeisenbankengruppe OÖ Verbund eGen
UniCredit Bank Austria AG
Volksbanken Verbund
Belfius Bank
BNP Paribas Fortis
Crelan
Dexia
Euroclear
Investeringsmaatschappij Argenta
KBC Groep
The Bank of New York Mellon
DSK Bank AD
First investment Bank AD
UniCredit Bulbank AD
United Bulgarian Bank AD
Erste&Steiermärkische Bank d.d.
Privredna Banka Zagreb d.d.
Zagrebačka banka d.d.
Bank of Cyprus Holdings Public Limited Company
Eurobank Cyprus Ltd
Hellenic Bank Public Company Ltd
The Cyprus Development Bank Public Company Ltd
Česká spořitelna, a.s.
Československá obchodní banka, a.s.
Komerční banka, a.s.
Danske Bank A/S
Jyske Bank A/S
Nykredit Realkredit A/S
Austria
Austria
Austria
Austria
Austria
Austria
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Belgium
Bulgaria
Bulgaria
Bulgaria
Bulgaria
Croatia
Croatia
Croatia
Cyprus
Cyprus
Cyprus
Cyprus
Czechia
Czechia
Czechia
Denmark
Denmark
Denmark
(
118
) The sample of banks is regularly adjusted to take into account bank-specific developments; for example, banks that
ceased activity or underwent a significant restructuring process are not considered further. Not all banks are subject to
all reporting requirements (e.g. those for FINREP). The list of banks that are the basis for the risk indicators refers to the
sample of banks used to calculate the Q2 2023 indicators. The
list of reporting institutions
are available on the EBA website.
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2818821_0119.png
R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
AS LHV Group
AS SEB Pank
Luminor Holding AS
Swedbank AS
Kuntarahoitus Oyj
Nordea Bank Abp
OP Osuuskunta
Banque centrale de compensation
BNP Paribas
BofA Securities Europe SA
Bpifrance
Confédération Nationale du Crédit Mutuel
Groupe BPCE
Groupe Crédit Agricole
HSBC Continental Europe
La Banque Postale
RCI Banque
SFIL S.A.
Société générale S.A.
Atlantic Lux HoldCo S.à r.l.
Bayerische Landesbank
Citigroup Global Markets Europe AG
COMMERZBANK Aktiengesellschaft
DekaBank Deutsche Girozentrale
DEUTSCHE APOTHEKER- UND ÄRZTEBANK EG
DEUTSCHE BANK AKTIENGESELLSCHAFT
Deutsche Pfandbriefbank AG
DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt
am Main
Erwerbsgesellschaft der S-Finanzgruppe mbH & Co. KG
Goldman Sachs Bank Europe SE
Hamburg Commercial Bank AG
HASPA Finanzholding
HSBC Trinkaus & Burkhardt GmbH
J.P. Morgan SE
Landesbank Baden-Württemberg
Landesbank Hessen-Thüringen Girozentrale
Morgan Stanley Europe Holding SE
Münchener Hypothekenbank eG
Norddeutsche Landesbank - Girozentrale -
State Street Europe Holdings Germany S.a.r.l. & Co. KG
UBS Europe SE
Volkswagen Bank Gesellschaft mit beschränkter Haftung
Wüstenrot Bausparkasse Aktiengesellschaft
Estonia
Estonia
Estonia
Estonia
Finland
Finland
Finland
France
France
France
France
France
France
France
France
France
France
France
France
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X*
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
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2818821_0120.png
EU RO PEAN
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A U THO R ITY
ALPHA SERVICES AND HOLDINGS S.A.
Eurobank Ergasias Services and Holdings S.A.
National Bank of Greece, S.A.
Piraeus Financial Holdings
Kereskedelmi és Hitelbank csoport
MKB csoport
OTP-csoport
Arion banki hf.
Íslandsbanki hf.
Landsbankinn hf.
AIB Group plc
Bank of America Europe Designated Activity Company
Bank of Ireland Group plc
Barclays Bank Ireland plc
Citibank Holdings Ireland Limited
Ulster Bank Ireland Designated Activity Company
BANCA MEDIOLANUM S.P.A.
Banca Monte dei Paschi di Siena S.p.A.
BANCA POPOLARE DI SONDRIO SOCIETA' PER AZIONI
BANCO BPM SOCIETA' PER AZIONI
BPER Banca S.p.A.
Cassa Centrale Banca
CREDITO EMILIANO HOLDING SOCIETA' PER AZIONI
FINECOBANK SPA
ICCREA BANCA SPA
Intesa Sanpaolo S.p.A.
Mediobanca - Banca di Credito Finanziario S.p.A.
UNICREDIT, SOCIETA' PER AZIONI
Akciju sabiedriba "Citadele banka"
AS "SEB banka"
Swedbank Baltics AS
LGT Group Foundation
Liechtensteinische Landesbank AG
VP Bank AG
“Swedbank”, AB
AB SEB bankas
Akcinė bendrovė Šiaulių bankas
Revolut Holdings Europe UAB
Banque et Caisse d´Epargne de l´Etat, Luxembourg
Banque Internationale à Luxembourg
BGL BNP Paribas
RBC Investor Services Bank S.A.
Quintet Private Bank (Europe) S.A
Greece
Greece
Greece
Greece
Hungary
Hungary
Hungary
Iceland
Iceland
Iceland
Ireland
Ireland
Ireland
Ireland
Ireland
Ireland
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Italy
Latvia
Latvia
Latvia
Liechtenstein
Liechtenstein
Liechtenstein
Lithuania
Lithuania
Lithuania
Lithuania
Luxembourg
Luxembourg
Luxembourg
Luxembourg
Luxembourg
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X*
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X*
X
X
X
X
X*
X
X
X
X
X
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2818821_0121.png
R I S K
A S S E S S M E N T
R E P O R T
O F
T H E
E U R O P E A N
B A N K I N G
A U T H O R I T Y
Société Générale Luxembourg
Bank of Valletta Plc
HSBC Bank Malta p.l.c.
MDB Group Limited
ABN AMRO Bank N.V.
BNG Bank N.V.
Coöperatieve Rabobank U.A.
de Volksbank N.V.
ING Groep N.V.
LP Group B.V.
Nederlandse Waterschapsbank N.V.
DNB Bank ASA
SpareBank 1 SMN
SPAREBANK 1 SR-BANK ASA
Bank Polska Kasa Opieki S.A.
Powszechna Kasa Oszczednosci Bank Polski S.A.
Santander Bank Polska S.A.
Banco Comercial Português, SA
Caixa Geral de Depósitos, SA
LSF Nani Investments S.à r.l.
SANTANDER TOTTA, SGPS, SA
Banca Comerciala Romana SA
Banca Transilvania
BRD-Groupe Société Générale SA
Slovenská sporiteľňa, a.s.
Tatra banka, a.s.
Všeobecná úverová banka, a.s.
AGRI EUROPE CYPRUS LIMITED
Nova KBM d.d.
Nova Ljubljanska Banka d.d., Ljubljana
OTP LUXEMBOURG S.A R.L.
SKB BANKA D.D. LJUBLJANA
Abanca Corporacion Bancaria, S.A.
Banco Bilbao Vizcaya Argentaria, S.A.
Banco de Crédito Social Cooperativo
Banco de Sabadell, S.A.
Banco Santander, S.A.
Bankinter, S.A.
Caixabank, S.A.
Ibercaja Banco, S.A.
Kutxabank, S.A.
Unicaja Banco, S.A.
Aktiebolaget Svensk Exportkredit
Luxembourg
Malta
Malta
Malta
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Netherlands
Norway
Norway
Norway
Poland
Poland
Poland
Portugal
Portugal
Portugal
Portugal
Romania
Romania
Romania
Slovakia
Slovakia
Slovakia
Slovenia
Slovenia
Slovenia
Slovenia
Slovenia
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Sweden
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X*
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
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2818821_0122.png
EU RO PEAN
B ANKING
A U THO R ITY
Kommuninvest - Grupp
Länsförsäkringar Bank AB - gruppen
SBAB Bank AB - Grupp
Skandinaviska Enskilda Banken - gruppen
Svenska Handelsbanken - gruppen
Swedbank - Grupp
Sweden
Sweden
Sweden
Sweden
Sweden
Sweden
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
The banks marked (*) are included in the transparency exercise in the ‘other banks’ bucket
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