The European Banking Authority (EBA) has on 29 November published the autumn edition of its risk assessment report (RAR). The Report is accompanied by the publication of the 2024 EU-wide transparency exercise, which provides detailed information, in a comparable and accessible format, for 123 banks from 26 countries across the European Union (EU) and the European Economic Area (EEA).
Highlights of the EBA risk assessment:
- EU/EEA banks continue to operate in an environment of slow economic growth and downside risks due to geopolitical risk.
- Lending is picking up slowly, while banks’ asset quality marginally deteriorated.
- Direct exposures of the EU banking sectors towards geopolitical risky countries are limited yet second round risks can be material.
- Risks relevant to CRE sector and the interlinkages with non-bank financial intermediaries remain significant for the EU banking sector.
- Climate and physical risks should not be underestimated.
- EU/EEA banks maintained strong capital positions. CET1 headroom remains well above overall capital requirements (OCR) and Pillar 2 Guidance (P2G).
- Profitability remains high, yet its sustainability is challenging, EU/EEA banks’ valuation lags in relation to their global peers.
- Operational risks, particularly those associated with cyber threats, are increasing.
- EU/EEA banks resort to AI to foster efficiencies and General-Purpose AI (GPAI) is gaining traction. But their growing use is not without risks.
