EU banks continue to be robust although risks from geopolitical tensions and cyber threats remain significant, the EBA Report shows

The European Banking Authority (EBA) today published the autumn edition of its risk assessment report (RAR). The Report is accompanied by the publication of the 2024 EU-wide transparency exercise, which provides detailed information, in a comparable and accessible format, for 123 banks from 26 countries across the European Union (EU) and the European Economic Area (EEA).

Highlights of the EBA risk assessment:

• EU/EEA banks continue to operate in an environment of slow economic growth and downside risks due to geopolitical risk.
• Lending is picking up slowly, while banks' asset quality marginally deteriorated.
• Direct exposures of the EU banking sectors towards geopolitical risky countries are limited yet second round risks can be material.
• Risks relevant to CRE sector and the interlinkages with non-bank financial intermediaries remain significant for the EU banking sector.
• Climate and physical risks should not be underestimated.
• EU/EEA banks maintained strong capital positions. CET1 headroom remains well above overall capital requirements (OCR) and Pillar 2 Guidance (P2G).
• Profitability remains high, yet its sustainability is challenging, EU/EEA banks' valuation lags in relation to their global peers.
• Operational risks, particularly those associated with cyber threats, are increasing.
• EU/EEA banks resort to AI to foster efficiencies and General-Purpose AI (GPAI) is gaining traction. But their growing use is not without risks.