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EBA publishes risk dashboard for EU banking sector

06 May 2014

The European Banking Authority (EBA) published today the first risk dashboard for 2014 summarising the main risks and vulnerabilities in the banking sector in the European Union (EU), based on the evolution of Key Risk Indicators (KRI) from 55 banks across the EU in the fourth quarter of 2013. This release of the Dashboard includes a one-off annex on aggregate risk parameters aimed at achieving transparency regarding EU banks' risk parameters, allowing comparison across countries and geographical areas.

Data in this edition of the EBA dashboard illustrates that EU banks' capital positions decreased as a result of cleaning up of balance sheets and taking on legal charges. This decrease of capital positions was outpaced by declining Risk Weighted Assets (RWAs), hence contributing to higher capital ratios. The quality of banks' loan portfolios deteriorated further, highlighting the importance of thorough assessment of asset quality, accompanied by consistent transparency.

Profitability levels have also been severely affected by the clean-up of some major banks in preparation to the Asset Quality Review (AQR) and Stress Test, and continued to be subdued. Generally, such a low margins environment is expected to persist.

This edition of the EBA dashboard also highlights a persistent shifting of balance sheets structure. During this last quarter of 2013, weighted average of debt-to-equity ratio fell to the lowest level of the last 4 years. Loan-to-deposit ratio declined significantly, also reaching the lowest level of the last 4 years.

The EBA risk dashboard is part of the regular risk assessment conducted by the EBA and complements the Risk Assessment Report. It is based on Q4 2013 data and takes into consideration the evolution of a set of Key Risk Indicators from 55 EU banks that the EBA has been collecting on a quarterly basis since 2009.

This update includes a one-off annex on aggregate risk parameters taken from the Transparency Exercise. This is part of the efforts to enhance data availability on EU banks and follows the work of the EBA on the consistency of RWAs.