European Central Bank statistics on banking supervision for the third quarter of 2021

In January 2022, the European Central Bank (ECB) published the supervisory banking statistics for the third quarter of 2021. The report consists of aggregate statistics on credit risk and loans, ie advances subject related to the COVID-19 pandemic, based on relevant performance reports supplied by European banking institutions. Thanks to this report, we get a clearer picture of the European banking system, which is especially important in a pandemic, because it makes the scope of negative effects and risks more certain, which allows for creating a suitable strategy for overcoming problems at the European level.

The reports have indicated that, unlike the previous quarter, Capital adequacy ratios of banks designated as significant financial institutions (those subject to ECB direct supervision) decreased slightly. Namely, at the end of the second quarter, the rate of capital adequacy rations was 19.40%, which is slightly higher than the rate from the third quarter, which was 19.30%.

Knowing that the share of non-performing loans (NPLs) in the total level of placements has been in constant decline for a long time, it is not surprising that it continues to follow the trend, so at the end of the third quarter of 2021 with a coefficient of 2.17 % is at a new historical minimum since the beginning of supervisory banking statistics were published (2015). The total share of NPL placements decreased compared to the previous quarter, when it amounted to 2.32%, ie there was a decrease from EUR 423 billion in the second quarter of 2021 to EUR 401 billion in the third quarter of the same year. This decrease was caused by a combination of falling NPLs and a greater volume of lending overall. At the European level, the average coefficient of NPLs ranged from 0.62% in Luxembourg to 10.49% in Greece, which has been recorded for years as the European country with the largest share of NPLs.

As one of the most significant indicators of profitability, thereturn on equity (RoE) at the end of the third quarter of 2021 was 7.19%, which is an increase compared to the second quarter of the same year, when it was 6.92%, and compared to period from a year ago, when it was 5.07%. The generation of operating income remained largely stable with an increase of EUR 1 billion compared to the previous quarter, while administrative expenses and depreciation, as well as impairments and provisions decreased.

Comparing to the second quarter of 2021 with 0.57 %, and last year’s results with 0.67 % the risk costs decreased to 0.53% in the third quarter of 2021.

The total loans and advances subject to COVID-19 related measures in the third quarter was further reduced by EUR 54 billion compared to the previous quarter, to EUR 494 billion. The decrease was driven by loans and advances subject to non-expired moratoria compliant with European Banking Authority (EBA) guidelines, which declined to EUR 44 billion from EUR 102 billion in the second quarter of 2021.

By analyzing the Statistics of the European Central Bank for the third quarter of 2021, based on relevant performance reports supplied by European banking institutions, it is noticeable that the banking system remains generally stable, with some minor fluctuations. Certainly, the impact of the COVID-19 virus pandemic is not diminishing, which is especially noticeable in comparison with the parameters before the pandemic. The ECB’s regular statistical reports have significantly facilitated access to the establishment of new strategies to identify potential risks and enable a more successful tackling the crisis.