Page 45 - 2014_3865_EBA 5th

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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
43
spondents have also reduced their appre-
hension of increased market competition in
retail deposits and wholesale deposits.
Simultaneously, RAQ respondents also re-
ported a decreased appetite for increasing
deposit bases through offering better rates
and terms to gain market share, conse-
quently reducing competition for deposits.
Further improved funding conditions and
wider market access have also contributed
to deposit pricing and, on average, the cost of
deposit funding has decreased slightly dur-
ing 2013.
5.3 Asset encumbrance
and collateral
The reliance on secured funding in the last
few years has increased the amount of en-
cumbered collateral. When the market fund-
ing conditions were most challenging, banks
needed to rely to secured funding from
markets and also increasingly from central
banks earmarking significant amounts of
collateral in their balance sheets. New li-
quidity and capital regulations will also put
increasing emphasis on collateralisation.
However, high levels of asset encumbrance
can be harmful and self-reinforcing.
Increase of unsecured funding reducing
pressure on collateral use
Looking ahead, banks continue to expect un-
secured debt to become again a significant
source of funding. This is paving the way to
reducing concerns regarding the levels of
encumbered assets (i.e. assets earmarked
as collateral for specific secured funding).
Nevertheless, several banks remain de-
pendent on central bank support, and future
withdrawals of public funding sources con-
tinue to be a challenge for some of them.
Another positive indication is the increasing
number of RAQ respondents who plan to re-
duce the use of central bank funding (Figure
43). Two thirds of respondents are not ac-
cessing, or are not intending to utilise, cen-
tral bank funding by utilising the changed
ECB collateral requirements from June
2013. The number of banks expecting to
rely more than in the past on secured fund-
ing has further decreased; consequently, a
minority of banks are also concerned about
higher asset encumbrance. On the other, an
increased number of respondents said that
the level of collateral necessary for new
funding is increasing.
Figure 42: Deposits (
source
: RAQ)
You see volatilities in
your wholesale deposit
due to increased
competition, rate
shopping or risk
perceptions.
You accept increasing
your deposit base
through offering better
rates and terms to gain
market share.
0 % 10 % 20 % 30 % 40 %
Jun 2014 B —
Somewhat agree
Dec 2013 B —
Somwehat agree
Jun 2013 B —
Somewhat agree
a. If so:
You are aiming to
reduce your
loan-deposit ratio.
i. Primarily via loan
growth control or
reduction.
ii.ƒPrimarily via funding
growth.
iii.ƒVia both: loan growth
control or reduction and
funding growth
0 % 10 % 20 % 30 % 40 %
Jun 2014 A — Agree
Dec 2013 A — Agree
Jun 2013 A — Agree