Page 36 - EBA 2013.2869 Risk Assesment Report final proof4

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E U R O P E A N B A N K I N G A U T H O R I T Y
34
Policy implications and possible
measures
EU banks face strong challenges in adapting
to the many changes derived from the emerg-
ing new economic, regulatory and financial
landscape and the sustainability of their re-
spective business models remains a motive
for concern. All these changes have led some
banks to be confronted with a situation where
their current business model proves to be
unviable. Overall, existing business models
will experience pressure by stronger compe-
tition and banks will need to adjust their busi-
ness models by finding additional sources of
income and cost efficiency, whilst it is still
unclear from where their future profitability
drivers will originate from.
Hence, supervisors need to create a more
coordinated analysis of banks’ business
models across the EU to assess banks’ profit
and funding model, business mix, manage-
ment strength and strategy. The current
methodologies and the monitoring intensity
are substantially different for each Europe-
an supervisor; therefore a coherent under-
standing of the commonalities and differ-
ences of approaches could be beneficial, as
would be the development of best practices
and harmonisation of assessments. To this
end, the EBA is devoting part of the Single
Supervisory Handbook to be written to the
assessment of banks’ business models. Su-
pervisors are required to have an accurate
assessment of core banking risks and chal-
lenge banks’ business plans. This should in
turn facilitate the joint decision processes
and business model risk could be an explicit
part of the joint risk assessment decision
discussion.
90 %
95 %
100 %
105 %
110 %
115 %
120 %
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 28: Cost-to-income ratio (
source:
KRI) —
numerator and denominator trends (Dec 2009 = 100)
The indicators point to some deterioration of banks’ ability to keep relative costs under control. The numerator of the cost-to-income ratio
shows an increasing trend since December 2009.