Risk Quantum/European Banking Authority (EBA)
Covid-forborne loans default en masse in EBA stress test
13.4% of ex-moratoria exposures in ‘stage three’ default at 2023 test end-point
EBA guidelines on IRB boosts Danske’s credit RWAs
The bank expects further increases in the second half of the year after adding $3.17 billion in Q2
Covid-forborne EU loans sour faster as more exit moratoria
Exposures classified as stage two rose 37% in the first three months of 2021
EU banks’ credit risk estimates stabilised at year-end
Weighted average corporate borrower PD across countries climbed to 2.15%
Own-country risk makes up 51% of EU bank sovereign portfolios
Home government exposures up seven percentage points in 2020
EU banks saw distressed loans heap up in Q4
‘Stage two’ assets make up 9.1% of banks’ total
Most EU banks use historical simulation approach to VAR
Few lenders favour Monte Carlo or parametric methodologies
At 40% of EU banks, credit risk own-funds deviate from benchmarks
Eleven banks lowballed capital requirements without justification in latest exercise
Fourteen EU banks face sanctions for poor market risk models
Twenty lenders lowballed capital requirements
UK banks count cost of EU software capital reversal
Average CET1 ratio would fall 29 basis points
EU banks count capital benefits of new software treatment
Deutsche Bank reaps 43bp gross benefit
EBA stress test to gird banks for long Covid depression
Real GDP projected to fall -12.9% from baseline by 2023
Credit risk of EU state-backed loans deteriorated in Q3
Almost 5% of public guarantee scheme loans are designated ‘stage two’
European banks held near €300bn of state-backed loans in Q3
Italian banks see public guarantee scheme loans increase the most quarter on quarter
Covid payment holidays for €224bn of EU loans ended in Q3
French, German and Italian banks saw most loans lose moratoria protection
EU banks’ reliance on ECB loans has grown in Covid’s wake
Central bank funding accounted for 14.5% of Greek banks’ liabilities in September
Barclays leads Europe’s banks on trading risks
Top 20 banks with most trading risks accounted for 79% of market RWAs across EBA sample
Four in five European banks don’t model their op risks
Advanced measurement approach is the preserve of large banks
CVA charges concentrated among top banks in Europe
Crédit Agricole, Deutsche Bank, Barclays, Commerzbank and Societe Generale account for 31% of total CVA across 135 banks
EU banks built up own-sovereign risks through Covid crisis
Italian, Spanish and French banks in particular saw holdings of domestic government debt surge
IFRS 9 relief added €30bn to EU bank capital post-Covid
Greek banks are top beneficiaries of emergency measures
Post-Covid crisis, EU banks have thin dollar liquidity buffers
Dollar LCRs declined between March and June
EU changes to Basel III would soften capital blow
“Parallel stacks” approach would reduce capital shortfall by 70%
Banks in outer EU grew loan reserves most through Covid – EBA
Substantial differences found at country level on degree of coverage ratio build