Page 28 - EBA 2013.2869 Risk Assesment Report final proof4

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4. Capital and
recapitalisation results
Over the 12 months ending in December 2012,
EU banks and respective capital positions
continued to maintain a noteworthy increas-
ing trend. In particular, over the second half of
2012, notwithstanding the challenging condi-
tions in financial markets, the banks’ capital
position once more has strengthened further.
This evolution reflects the national efforts
progressing towards strong capital buffers
as well as the EBA recapitalisation exercise,
leading to substantial infusions of capital into
EU banks and establishing new standards for
the quantity and quality of banks’ capital. Eu-
ropean supervisors, nonetheless, will need
to continue to monitor the smooth and timely
transition to the CRR/CRD framework.
The KRIs confirm this positive evolution.
The median Tier 1 ratio increased by 10 ba-
sis points (from 11.7 % to 11.8 %), after an
increase of almost 1 percentage point, from
10.9 % to 11.7 % in the previous semester.
Banks with a Tier 1 capital ratio above 12 %
significantly increased and represented ap-
proximately 72 % of the total assets of the
KRI sample in December 2012 (in comparison
with 63 % in June 2012 and more than three
times than the December 2009 value). This
positive trend is also confirmed when looking
at the median of Tier 1 ratio excluding hybrid
instruments (a rough proxy of the Core Tier
1 ratio (CT1)) which increased from 10.3 %
to 10.5 %. Both, the 25th percentile and the
weighted average also increased from 9.3 %
and 10.2 % to 9.6 % and 10.8 %, respectively.
Equivalently, banks with Tier 1 ratio exclud-
ing hybrid instruments lower than 5 % de-
creased and represented only 1 % of total
assets in December 2012 (from around 2 % in
June 2012). At the same time, banks with Tier
1 ratio excluding hybrid instruments higher
than 10 % increased and represented more
than 80 % of total assets in December 2012
(from 73 % in June 2012). The dispersion of
the indicators decreased markedly, suggest-
ing that banks in the sample are converging
towards a more conservative solvency base.
This evolution partly reflects European banks’
significant progress in boosting their capital
positions and in strengthening the overall re-
silience of the EU banking systemas a result of
the EBA recapitalisation exercise. The recapi-
talisation recommendations have brought the
common equity capital ratios of EU banks in
line with those of major international competi-
tors. EU bank capital levels are aligning busi-
ness models to both markets’ expectations
and to forthcoming regulatory requirements
and the capital strengthening is also a result
of measures taken by EU banks to comply with
the 2011 EBA recommendation which asked
EU banks to raise their CT1 ratio to 9 %, af-
ter accounting for an additional buffer against
sovereign risk holdings. The capital exercise
5 %
0 %
5 %
10 %
15 %
20 %
25 %
Dec 09
Mar 10
Jun 10
Sep 10
Dec 10
Mar 11
Jun 11
Sep 11
Dec 11
Mar 12
Jun 12
Sep 12
Dec 12
Figure 18: Tier 1 ratio (excluding hybrid instruments) (
KRI) — 5th and 95th percentiles,
interquartile range and median