With the level of non-performing loans (NPLs) in the European Union estimated at €419 billion, or 2.1% of total assets (compared to 2.3% in mid-2021 - see EUROPE 12846/10), the quality of financial assets continued to improve in the third quarter of 2021, according to the results of the Risk Dashboard published by the European Banking Authority (EBA) on Monday 10 January.
After a significant increase in previous quarters, the share of loans considered as underperforming (stage 2) stabilised at €380 billion, or 2.0% of total loans. Additionally, the share of loans subject to a moratorium on repayment fell further to a total of €50 billion, with Portugal and Italy reporting €19.4 billion and €14.9 billion respectively, followed by Spain with €9.5 billion.
Nevertheless, the EBA identifies several areas of concern: - the quality of bank assets benefiting from emergency support put in place to deal with the Covid-19 pandemic (5% of bank loans that benefited from a moratorium were converted into NPL loans); - the evolution of the commercial and residential real estate market, the latter sometimes showing a risk of overheating.
At the end of September 2021, the banks were also strongly capitalised with a level of CET1 capital at 15.4% of total banking assets, if the Basel III prudential rules are fully applied. Under these rules, the leveraged debt ratio was 5.7%.
ESG. According to the dashboard, 80% of the banks in the panel indicated that they take into account environmental, social and governance (ESG) risks as credit risks, and 70% consider them as reputational and operational risks.
See the dashboard: https://bit.ly/3GpiOBC (Original version in French by Mathieu Bion)