NOVEMBER 2018 Europa

November 2018 Europa-Free PDF

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RESTRICTED, European Commission Services European Central Bank Single Resolution Board. Overview of main developments, Capital The average Common Equity Tier 1 CET1 Capital ratio has improved by 2 8 percentage points pp to 13 8 since the. position establishment of the BU, Most Member States MS now exhibit higher CET1 Capital ratios than four years ago. Following consecutive improvements in the average CET1 Capital ratio until Q4 2017 Q2 2018 figures saw a 0 5 pp. decrease in the CET1 Capital ratio which is mainly attributed to a reduction in CET 1 Capital also linked to the. IAS39 IFRS9 migration, ratio Banks have on average reduced their leverage by 1 1 pp as the average Leverage ratio improved from 4 0 in Q4. 2014 to 5 1 in Q2 2018, Liquidity and The liquidity and net funding position of banks as measured by the Liquidity Coverage Ratio LCR and the Net.
Net Stable Stable Funding Ratio NSFR continues to be strong The average LCR and NSFR have consistently been above. Funding the 100 minimum fully loaded requirements since the inception of the SSM. position Improvements in the NSFR from 101 9 in Q4 2014 to 113 2 in Q2 2018 further indicate that the funding profile of. banks has on average become more robust over the last few years. The average NPL ratio has decreased by 3 5 pp since Q4 2014 reaching 4 4 in Q2 2018. NPL ratios have decreased for almost all MS with larger decreases for MS with high NPL ratios. Overall banks have made progress in building up their Minimum Requirement for Eligible Liabilities MREL. capacity in order to reach the steady state requirement as set by the SRB The total MREL still needed to reach the. level of the requirement is approximately 7 9 of the total requirement. In particular the accumulated other comprehensive income and retained earnings categories. A number of firms chose to take the full deduction rather than making use of the transitional arrangements. Assessment of Risk Reduction indicators, This section assesses a the evolution of selected indicators at MS level and b how the level. of risk in the BU has been affected,1 Capital position. Quantitative indicators, Fully Loaded Common Equity Tier 1 CET1 Capital Ratio Ratio of fully loaded. CET1 capital total risk weighted assets RWAs Indicator 1 Charts 1 1 and 1 2 3. Fully Loaded Tier 1 Tier 1 Capital Ratio Fully loaded Tier 1 capital total RWAs. Indicator 2 Charts 2 1 and 2 2 4, Fully Loaded Total Capital Ratio Fully loaded total capital total RWAs ratio. Indicator 3 Charts 3 1 and 3 2 5,Commentary, CET1 Capital Ratio Since the end of 2014 the BU weighted average CET1 ratio has.
improved by 2 8 pp to 13 8 in Q2 2018 Compared with Q4 2017 Q2 2018 marked a. 0 5 pp decrease in the CET1 ratio This change is mainly due to a reduction in CET1. capital which in turn is driven by accumulated other comprehensive income and. retained earnings and also linked to the IAS39 IFRS9 migration as a number of firms. chose to take the full deduction rather than making use of the transitional. arrangements 6, CET1 Tier 1 and Total Capital Ratios Except for the recent drops in Q1 and Q2. 2018 there has been a long term improvement for all three capital measures across. banks Charts 1 1 2 1 and 3 1, MS specific developments There have been notable improvements for MS with low. capital ratios in 2014 including GR IE PT and BE, The CET1 Capital Ratio indicates the extent to which an institution can absorb losses on a going concern basis using CET1. capital resources, The Tier 1 Capital Ratio indicates the extent to which an institution can absorb losses on a going concern basis using Tier 1. capital resources i e CET 1 and additional Tier 1 capital resources. The Total Capital Ratio indicates the extent to which an institution can absorb losses on a going concern basis using Total. Capital resources i e CET 1 and additional Tier 1 capital resources as well as Tier 2 capital. On 1 January 2018 IFRS 9 became effective for EU firms Regulation EU 2017 2395 foresees a five year transitional. arrangement allowing institutions to phase in the immediate Day 1 capital impact Institutions should decide whether to apply. those transitional arrangements and inform the competent authority accordingly. Indicator 1 Fully Loaded CET1 Capital Ratio, Chart 1 1 Fully Loaded CET1 Capital Ratio Evolution in the BU Chart 1 2 Fully Loaded CET1 Capital Ratio by MS.
AT BE CY DE EE ES FI FR GR IE IT LT LU LV MT NL PT SI SK. 25th 75th percentile Mean Median 2014Q4 2018Q2 2014Q4 2018Q2. Source ECB staff contribution COREP and ECB calculations See methodological notes in Annex III. Indicator 2 Fully Loaded Tier 1 Capital Ratio, Chart 2 1 Fully Loaded Tier 1 Capital Ratio Evolution in the BU Chart 2 2 Fully Loaded Tier 1 Capital Ratio by MS. AT BE CY DE EE ES FI FR GR IE IT LT LU LV MT NL PT SI SK. 25th 75th percentile Mean Median 2014Q4 2018Q2 2014Q4 2018Q2. Source ECB staff contribution COREP and ECB calculations See methodological notes in Annex III. Indicator 3 Fully Loaded Total Capital Ratio, Chart 3 1 Fully Loaded Total Capital Ratio Evolution in the BU Chart 3 2 Fully Loaded Total Capital Ratio by MS. AT BE CY DE EE ES FI FR GR IE IT LT LU LV MT NL PT SI SK. 25th 75th percentile Mean Median,2014Q4 2018Q2 2014Q4 2018Q2. Source ECB staff contribution COREP and ECB calculations See methodological notes in Annex III. 2 Leverage,Structural measure, When adopted the risk reduction package7 will introduce a binding leverage ratio to. prevent institutions from accumulating excessive leverage as well as a leverage ratio. buffer requirement for institutions qualifying as global systemically important institutions. G SIIs The leverage ratio is intended to reinforce the risk based capital requirements. with a simple non risk based backstop,Quantitative indicator.
Fully Loaded Leverage Ratio Ratio of fully loaded Tier 1 capital total leverage ratio. exposure8 as per CRR D definitions reported in the EBA ITS on supervisory reporting. Indicator 4 Charts 4 1 and 4 2 9,Commentary, Fully Loaded Leverage Ratio As highlighted above banks have on average. reduced their leverage by 1 1 pp with the average leverage ratio improving from 4 0. in Q4 2014 to 5 1 in Q2 2018, Q1 2018 data point With the exception of Q1 2018 leverage ratios have tended to. improve consistently across the BU since Q4 2014 The 0 3 pp decrease in Q1 2018. figures is primarily due to a decrease in Tier 1 capital numerator and to a lesser extent. by an increase in overall leverage exposure denominator The decrease in Tier 1. capital was in turn driven by the reduction in CET1 capital accumulated other. comprehensive income and retained earnings also linked to the IAS39 IFRS9. migration whereby a number of firms chose to take the full deduction rather than. making use of the transitional arrangements 10, MS specific developments With the exception of CY LU LV and SK which had. lower weighted average fully loaded leverage ratios in Q2 2018 compared to Q4. 2014 most MS have seen a material increase in the aggregate leverage ratio. For an overview of the key proposals in the the risk reduction package please see Annex I This legislative package of. reforms was proposed by the Commission on 23 November 2016 and is currently subject to Trilogue negotiations see. http europa eu rapid press release IP 16 3731 en htm. The exposure measure includes both on balance sheet exposures and off balance sheet items On balance sheet exposures. are generally included at their accounting value although exposures arising from derivative transactions and securities financing. transactions are subject to separate treatment in essence amounts owed to a bank are excluded while any on balance sheet. collateral related to such transactions is included. The Fully Loaded Leverage Ratio indicates the level of dependence on either shareholder or external financing for usual. financing activities as defined by the institution s business model This ratio uses Tier 1 capital to judge how leveraged a bank is. in relation to its consolidated assets The higher the leverage ratio the greater the resilience to shocks affecting a bank s. balance sheet, On 1 January 2018 IFRS 9 became effective for EU firms Regulation EU 2017 2395 foresees a five year transitional. arrangement allowing institutions to phase in the Day 1 capital impact Institutions should decide whether to apply those. transitional arrangements and inform the competent authority accordingly. Indicator 4 Leverage Ratio, Chart 4 1 Fully Loaded Leverage Ratio Evolution in the BU Chart 4 2 Fully Loaded Leverage Ratio by MS.
AT BE CY DE EE ES FI FR GR IE IT LT LU LV MT NL PT SI SK. 25th 75th percentile Mean Median 2014Q4 2018Q2 2014Q4 2018Q2. Source ECB staff contribution COREP ECB calculations See methodological notes in Annex. 3 Liquidity and funding position,Structural measure. When adopted the risk reduction package11 will introduce a binding net stable funding. ratio NSFR to address previous excessive reliance on short term wholesale funding. and to reduce long term funding risk,Quantitative indicators. Fully Loaded Liquidity Coverage Ratio LCR Ratio of liquidity buffer net liquidity. outflow Indicator 5 Charts 5 1 and 5 2 12, Fully Loaded NSFR Ratio of available stable funding ASF required stable funding. RSF as reported in SSM Short Term Exercise and Basel III monitoring exercise. templates Indicator 6 Charts 6 1 and 6 2 13,Commentary. Fully Loaded LCR On a BU aggregate level the mean and median weighted average. LCR figures have been above the minimum fully phased in requirement of 100 since. the start of the reporting period in Q4 2014, Fully Loaded NSFR On a BU aggregate level the mean and median weighted.
average NSFR figures have been above the minimum fully phased in requirement of. 100 since the first reporting point in Q4 2014 and the weighted average has improved. further by 11 3 pp to 113 2 since then, MS specific NSFR developments Almost all MS met the fully phased in minimum. requirement of 100 in Q2 2018, For an overview of the key proposals in the risk reduction package please see Annex I This legislative package of reforms. was proposed by the Commission on 23 November 2016 and is currently subject to Trilogue negotiations see. http europa eu rapid press release IP 16 3731 en htm. The fully loaded LCR indicates whether an institution has an adequate stock of unencumbered high quality liquid assets. HQLA that can be converted into cash with little or no loss of value in private markets to meet its liquidity needs for a 30. calendar day liquidity stress scenario, The NSFR indicates the ASF calculated using liabilities as a percentage of the RSF calculated using assets. Indicator 5 Fully Loaded Liquidity Coverage Ratio LCR. Chart 5 1 Fully Loaded LCR evolution in the BU Chart 5 2 Fully Loaded LCR by MS. AT BE CY DE EE ES FI FR GR IE IT LT LU LV MT NL PT SI SK. 2014Q4 2018Q2 2014Q4 2018Q2,25th 75th percentile Mean Median. Source ECB staff contribution COREP STE and ECB calculations The figures for Greek banks should be interpreted carefully as external factors are hindering the use of the LCR as a measure of. progress on risk reduction for these banks See methodological notes in Annex III. Indicator 6 Fully Loaded NSFR, Chart 6 1 NSFR Evolution in the BU Chart 6 2 NSFR by MS.
AT BE CY DE EE ES FI FR GR IE IT LT LU LV MT NL PT SI SK. 25th 75th percentile Mean Median 2014Q4 2018Q2 2014Q4 2018Q2. Source STE ECB calculations The values for Austria Belgium Germany Ireland Italy Malta and the Netherlands in 2014 Q4 might be affected by missing data for a small number of banks See. methodological notes in Annex III,Structural measures. Progress made to date, Bank Creditor Hierarchy Directive Directive EU 2017 2399 published on 12. December 2017 transposition ongoing The adoption and transposition of the Bank. Creditor Hierarchy Directive EU 2017 2399 enhances legal certainty regarding. compliance with the subordination requirement and contributes to the increased. issuance of senior non preferred debt, Adoption of SRB 2017 MREL policy This forms the basis for decisions on MREL. requirements during the 2017 resolution planning cycle. Risk reduction package14 to be finalised in 2018 and adopted in 2019. SRB 2018 MREL policy due to be adopted by the end of 2018 This will form the basis. for decisions on MREL requirements solo and consolidated levels during the 2019. resolution planning cycle,Quantitative indicators15. MREL Target MREL consolidated target and subordinated requirement expressed as. a percentage of total risk exposure amount TREA 16 per MS Indicator 7 Chart 7 1. Outstanding MREL Eligible Liabilities Outstanding stock of MREL eligible. subordinated and non subordinated instruments including own funds instruments. expressed as a percentage of TREA per MS Indicator 8 Chart 8 1. MREL Shortfall Computed as the difference between the MREL requirement and the. outstanding stock of MREL eligible instruments The part of the total MREL shortfall. referring to subordinated debt is also presented Variables are expressed in millions. and as a percentage of TREA per MS Indicator 9 Charts 9 1 and 9 2. 14 For an overview of the key proposals in the risk reduction package please see Annex I This legislative package of reforms. was proposed by the Commission on 23 November 2016 and is currently subject to Trilogue negotiations. http europa eu rapid press release IP 16 3731 en htm. 1 Report prepared for the 15 November 2018 Eurogroup Working Group meeting 2 November 2017 2014 to 5 1 in Q2 2018 The liquidity and net funding position of banks as measured by the Liquidity Coverage Ratio LCR and the Net Stable Funding Ratio NSFR continues to be strong The average LCR and NSFR have consistently been above the 100 minimum fully loaded requirements since the

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