EBA claims asset quality rises, but banks still fear cyber risk

The European Banking Authority (EBA) claims asset quality has improved, but cyber risk is still a major concern for EU banks.

This comes after the EBA released its quarterly Risk Dashboard, alongside the results of the autumn edition of the Risk Assessment Questionnaire (RAQ).

It stated that the non-performing loan (NPL) ratio declined to 2.1% and the state 2 ratio contracted to 8.7%. Fur, it stated that the reduced NPL ratio was driven by a 5% decrease in NPLs. Return on equity (RoE) was also higher than pre-pandemic levels at 7.7%.

The results of the RAQ found that 50% of banks cover their cost of equity (CoE), with over 70% of banks estimate CoE range between 8% and 12%. It stated the effect the Omicron variant will impact asset quality and profitability.

One of the findings of its report, which can be found here, was that the Common Equity Tier 1 (CET1) ratio reached 15.4% on a fully loaded basis in Q3 2021. It declined by 10bps due to a small decrease in capital combined with a small increase on weighted assets.

The EBA continued to state that 55% of banks expect operational risks to increase. Of these, 90% consider cyber risk and data security issues, and 40% cite conduct and legal risk as the core drivers of the rise.

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