European Central Bank (ECB)
The changing shape of bank credit risk post-Covid‑19
As banks and fellow market participants manage a return to some sense of normality following the Covid-19 pandemic, what are the likely long-term implications for data and credit risk management?
Wobblier eurozone banks most exposed to climate change
Lenders with lower CET1 ratios and weaker returns could face more credit defaults from global warming
Covid-forborne EU loans sour faster as more exit moratoria
Exposures classified as stage two rose 37% in the first three months of 2021
Eurozone banks add €10bn of Level 3 assets in Q1
First quarterly increase in mark-to-model assets post-pandemic
ECB tightens grip on back-to-back booking models
Supervisor could impose large exposures limit for intragroup trades, even if UK granted equivalence
LCR rises for EU banks in Q1, but liquidity strategies diverge
Eurozone banks are still hoarding liquidity, but as vaccines take effect a rethink may be needed
Time for BoE to rethink the leverage ratio
The disparity of treatment keeps UK banks on an unlevel playing field
EU regulators want Basel sign-off before leverage ratio changes
Risk Live: Benefits of temporary leverage exemptions are still to be determined, ECB official says
Deutsche leads eurozone banks on exempted exposures
German bank increased central bank reserves currently excluded from leverage ratio the most in Q1
Basel would readjust leverage ratio if reserves exempted
Basel’s Rogers says permanent relief for central bank reserves should lead to higher minimum ratio
ABN Amro’s market risk charge grew 54% over Q1
Dutch bank hit with higher VAR and SVAR multipliers
SocGen’s cash pile grew to €163bn in Q1
Central bank deposits surge while other HQLAs shrink
Deutsche slashed market RWAs by one-fifth in Q1
Macro-hedging touted as RWA-saving tool
Basel playing catch-up on climate risk, say experts
Individual regulators have already gone further in encouraging transition
ECB’s Trim found 900 flaws with 31 banks’ market risk models
Remedying shortcomings added €11 billion to market RWAs in aggregate
ECB’s models review heaped €275bn of extra RWAs on banks
Average bank CET1 capital ratio fell 71bp through Trim process
Share of small EU bank assets under standardised approach grew in 2020
At small banks, SA covered 88% of credit exposures
BNP Paribas’s LCR hit record high in 2020 in wake of deposit glut
HQLA jumped 10% in Q4
At 40% of EU banks, credit risk own-funds deviate from benchmarks
Eleven banks lowballed capital requirements without justification in latest exercise
Euro banks’ trading activities pose lopsided risk to capital – ECB
Elevated downside risks to capital posed by net trading income
OTC FX options market gears up for faster electronification
Share of electronic trading remains low but host of factors promise to change that for good
EU banks expect OTC trading conditions to tighten
Credit conditions had eased in Q3 and Q4 2020, but were expected to get tougher in Q1
Regulatory breaks strengthened EU banks’ CET1 ratios in 2020
In spite of Covid turmoil, top lenders improved their CET1 ratios by around 70bp on average
Model reviews imposed capital charges on top EU banks in Q4
Societe Generale incurred a -36bp hit to its CET1 ratio due to Trim