EBA Risk Dashboard points to high capital and liquidity ratios and indicates first signs of deterioration in asset quality not least related to geopolitical tensions

The European Banking Authority (EBA) today published its quarterly Risk Dashboard together with the results of the autumn edition of the Risk Assessment Questionnaire (RAQ).

• The average common equity tier 1 CET1 ratio (fully loaded) declined to 15%, due to an increase in RWAs and a small drop in CET1 Capital.
• Banks’ liquidity buffers are still abundant despite a decline of the liquidity coverage ratio (LCR).
• Non-performing loans (NPLs) continued to decrease, but stage 2 loans and cost of risk increased.
• Banks’ return on equity (RoE) declined amid higher impairments and lower positive one-offs. Going forward, market analysts expect higher impairments to offset the positive impact of rising rates in revenues.
• Banks continued to be concerned about cyber risk and operational risk stemming from geopolitical tensions.

Notes to editors

Key indicators have been visualised in a dynamic way. To facilitate the navigation, here is the full list of key indicators that you can find in the graphs:

Slide 1: The average CET1 ratio (fully loaded) declined to 15%, due to an increase of RWA and a small drop in CET1 Capital DOWLOAD DATA

Slide 2: Liquidity position of banks is still abundant despite a decline of the LCR DOWLOAD DATA

Slide 3: NPLs continued to decline further, but stage 2 loans and cost of risk increased DOWLOAD DATA

Slide 4: A substantial share of banks plans to maintain their COVID overlays to cover potential losses 

Slide 5: The total volume of loans subject to public guarantee schemes (PGS) and its share in stage 2 were broadly stable DOWLOAD DATA

Slide 6: Return on equity decreased albeit other profitability indicators remained roughly stable DOWLOAD DATA

Slide 7: Banks’ RoE declined lagged by higher impairments and lower positive one-offs DOWLOAD DATA

Slide 8: Banks are optimistic about rising rates 

Slide 9: Market analysts expect higher impairments to offset the positive impact of rising rates in revenues 

Slide 10: Banks are more concerned about the impact of geopolitical tensions on operational risk 

The figures included in the Risk Dashboard are based on a sample of 160 banks, covering more than 80% of the EU/EEA banking sector (by total assets), at the highest level of consolidation, while country aggregates also include large subsidiaries (the list of banks can be found here). The EBA conducts semi-annual Risk Assessment Questionnaires among banks and market analysts. This Risk Assessment Questionnaire was carried out in spring 2022, in response to which 60 banks and 11 market analysts submitted their answers.