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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 — J U N E 2 0 1 4
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4. Capital
Over the course of 2013, EU banks’ capital
positions have continued to maintain an im-
portant increasing trend. In 2013, for example,
the euro area banks raised over EUR 80 bil-
lion in capital and, in 2014, they will raise over
EUR 60 billion according to some market es-
timates. In particular, over the second half of
2013, notwithstanding still some challenging
conditions in financial markets, the banks’
capital position has strengthened once more;
however, this was on the back of falling risk
weighted assets (Figure 25).
Core tier 1 capital levels have
substantially improved
In the EBA’s recapitalisation exercise, com-
pleted in 2012, as well as the national efforts
progressing towards strong capital buffers
during 2013, the weighted average tier 1 ratio
excluding hybrid instruments for the largest
European banks stood at 11.6 % in December
2013 (an increase of 50 basis points in com-
parison with June 2013). This is strong evi-
dence of substantial infusions of capital into
European banks in line with major interna-
tional peers and also revealing that the 2014
EU wide AQR and stress test exercise have
triggered capital increases despite some re-
ductions in risk weighted assets (RWAs).
As banks also issue Additional Tier 1
bonds — contingent convertibles —
CoCos
EU banks are issuing additional tier 1 bonds
(also named contingent convertibles (CoCos))
or tier 2 bonds. Market data show a total is-
suance of AT1 CoCos by EU banks of ap-
proximately EUR 22 billion up until the end of
May 2014 (Figure 26).
11.1 %
12.0 %
12.5 %
12.6 %
13.1 %
10.0 %
10.5 %
11.0 %
11.5 %
12.0 %
12.5 %
13.0 %
13.5 %
Dec 11
Jun 12
Dec 12
Jun 13
Dec 13
Weighted average
Figure 25: Tier 1 capital ratio — weighted average (
source
: EBA KRI data)