Page 29 - EBA 2013.2869 Risk Assesment Report final proof4

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R I S K A S S E S S M E N T O F T H E E U R O P E A N B A N K I N G S Y S T E M
27
led to an increase in banks’ capital positions
of more than EUR 200 billion. For the 27 banks
which were requested to submit capital plans,
due to a capital shortfall of EUR 76 billion, the
exercise resulted in an aggregate recapitali-
sation in the amount of EUR 116 billion. Over-
all, the cumulative impact on capital levels of
the measures put in place by banks in 2011
and 2012 in relation to the EBA initiatives is
about EUR 250 billion.
Despite the challenging conditions in finan-
cial markets and little investor appetite for
new equity, banks’ capital position and re-
spective compliance with the EBA recom-
mendation has been achieved mainly via new
capital measures such as retained earnings,
new equity, and liability management, and, to
a lesser extent, by releasing capital through
measures impacting risk-weighted assets
(RWAs) (e.g. by reduced lending and sales of
assets). Banks have been increasing capital
relative to assets even if total asset reduction
has been less pronounced than risk-weight-
ed declines might suggest. In this respect,
aggregate data shows that these new capital
measures have been more than enough to
cover shortfalls.
Nonetheless, measures to strengthen capi-
tal directly may be vulnerable to the risk of
weaker earnings. While the banks’ capital
positions have improved, European supervi-
sors will continue to monitor the smooth and
timely transition from the new EBA stand-
ards to the CRR/CRD framework for banks.
COMPLIANCE WITH THE EBA DECEMBER 2011
RECOMMENDATION (EBA/REC/2011/1)
As of December 2012, the banks involved in
the data collection reached a Core Tier 1 ratio
of 11 %, taking into account Sovereign Capital
Buffer (EUR 31.5 billion and 0.3 % of RWAs)
and including other instruments eligible and
existing government support measures. The
same ratio was equal to 10.7 % in June 2012
and to 9.1 % in September 2011. The overall
surplus of capital in excess of 9 % increased
by EUR 175 billion from September 2011 to
December 2012. At the same time bank dis-
persion has narrowed during the same period
with the range between minimum and maxi-
mum declining from 20.3 % to 13.2 % and the
interquartile ranging from 4.3 % to 3.3 %.
An analysis has been carried out to identify
the main drivers of the CT1 ratio trend and
to decompose its variation into capital and
RWAs components. Chart below illustrates
the relative importance of the CET1 (nu-
merator) and RWA (denominator) effects on
the CET1 ratio by jurisdiction. The green ar-
eas represent a positive variation of the CT1
ratio between September 2011 and Decem-
ber 2012. In contrast, the red areas show a
negative variation of the CT1 ratio between
September 2011 and December 2012. In one
country (area Q4/b) there has been a reduc-
tion of CT1 ratio, due to a reduction of capi-
tal, partially offset by a reduction of RWAs. In
Figure 19: CT1 ratio after including sovereign capital buffer and additional impairments on
sovereign exposures
Sep 11
Dec 11
Jun 12
Dec 12
30 %
25 %
20 %
15 %
10 %
5 %
0 %
9.1 %
9.7 %
10.7 %
11.0 %
Interquartil
range
= 4.3 %
Range
[Min, Max]
= 20.3 %
Range
[Min, Max]
= 13.2 %
Interquartil
range
= 3.3 %
The figures represent the CT1 ratio and respective minimum (orange line) and maximum (blue line), interquartile range (25th and 75th) and
weighted average (based on risk-weighted assets per institution).