EBA updates its risk dashboard for EU banking sector

03 June 2015

The European Banking Authority (EBA) published today the periodical update of its risk dashboard. The risk dashboard summarises the main risks and vulnerabilities in the banking sector on the basis of the evolution of a set of key risk indicators across the European Union (EU) for the fourth quarter of 2014.

The EBA's risk dashboard confirms that in Q4 2014, EU banks' capital positions remained strong, with a Common Equity Tier 1 (CET1) ratio of 12.1 per cent. This is an increase of 50 basis points compared to 2013. Total balance sheet and loan volumes were in general back to modest growth in 2014, but with diverging trends in some countries. The quality of banks' loan portfolios remained weak but bottoming out. Compared to year end 2013, the impairment ratio of loans slightly decreased by 20 basis points to 6.6 per cent.

Profitability showed a mildly positive trend on a year over year comparison, but return on equity remained subdued and materially below banks' average cost of equity. The average return on equity steadily increased from zero in 2011 to 3.6 per cent per year at year-end 2014. The cost-to-income ratio (63.6 per cent in Q4 2014) showed the highest value since 2009 (55.2 per cent), mainly driven by growing costs.

In 2014, at an EU level, deposits increased more than loans. Accordingly, the EU average loan‐to‐deposit ratio decreased further in Q4 2014 to 108.6% which is the lowest ratio since 2009. There were material differences in deposit volume trends and loan-to-deposit ratios between countries, ranging from about 50 per cent to more than 170 per cent.

The EBA risk dashboard is part of the regular risk assessment conducted by the EBA and complements the semi-annual risk assessment report. It is based on Q4 2014 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.