Regulator’s report: EU banks at risk from bad loans

Technology-related risks are increasing amid lingering litigation concerns

LONDON: The greatest risks facing European Union banks are high levels of bad loans and lower profitability, the bloc’s financial regulator said in a report on Friday.

The European Banking Authority said that while EU-wide lenders had strengthened their capital buffers, technology-related risks were increasing amid lingering litigation concerns.

Presenting its ninth report on “Risks and vulnerabilities in the EU banking sector”, the EBA pointed to high levels of non-performing loans (NPLs) and sustained low profitability as being the main risks.

But it said that overall, the 131 banks had further strengthened their capital position, allowing them to continue the process of repair against a backdrop of high volatility in funding markets. The regulator noted that the NPL ratio for the assessed banks as set against total loans had decreased overall to 5.4% in the second half of 2016 from 6.5% at the end of 2014.

“While there are signs of potential improvements, asset quality is still weak compared to historical figures and other regions,” the EBA said. “Material differences persist in asset quality across countries, with more than one-third of EU jurisdictions showing NPL ratios above 10%.”

Published in The Express Tribune, December 4^th, 2016.

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