Page 12 - 2014_3865_EBA 5th

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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
10
2. External environment
2.1 Market sentiment
and macroeconomic
environment
Europe has made significant progress in im-
plementing structural reforms, at both na-
tional and EU wide levels, and the positive
market sentiment is spreading to all EU Mem-
ber States. Several initiatives have allayed the
markets, and policy support and institutional
changes have played an important role in this
respect. EU banks’ capital positions have in-
creased and funding conditions improved dur-
ing 2013 and in the first half of 2014. Sovereign
debt spreads have continued to tighten and
bank debt issuance has continued to develop
positively in benign funding conditions. Even
banks in countries with financially stressed
sovereigns have continued to access both the
debt and the equity markets. Increased confi-
dence in stating that the worst of EU banking
system’s woes are over have seen iTraxx Euro
Financials Credit Default Swaps (CDS) Index
and the EBA EU Bank CDS Index tightened
since July 2013 (Figure 1). These views rein-
force a positive stance on financials and bank
bonds across Europe, including financially
stressed countries.
Europe’s macroeconomic environment con-
tinues to display some signs of improvement;
nevertheless, risks towards the global outlook
remain conspicuous with the existence of sub-
dued indicators and some ongoing dislocation
between the positive market sentiment in fi-
nancial markets and the still fragile macro-
economic environment.
There is a positive market sentiment and
investor demand continues to be high
As a consequence of decisive policy measures
and regulatory steps, funding conditions have
continued to ameliorate in general, and par-
ticularly for banks in financially stressed coun-
tries, both for large and small banks. Thus, EU
banks have continued to be active issuers over
the first months of 2014, confirming that banks
Figure 1: Stock index — STOXX® Europe 600 banks share price index and CDS Index — EBA EU
banks CDS Index, average Dec 2011=100 (
source
: Bloomberg, EBA calculations)
0
20
40
60
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Jan 12
May 12
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May 14
STOXX® Europe 600 banks
EBA EU banks CDS