Fewer banks with fewer assets in euro area: ECB

4th November 2013, Comments 0 comments

The number of banks in the 17-country eurozone has declined over the past five years and they significantly reduced their balance sheets, the European Central Bank said on Monday.

"By the end of 2012, banking sector assets in the euro area... had dropped by almost 12 percent compared with 2008, to 29.5 trillion euros"($40 billion), the ECB wrote in a new report detailing structural developments in the region's banking sector.

The major part of the adjustment took place in 2009, as the financial crisis unfolded, the ECB said.

Banks have been under pressure to slash their balance sheets and increase core capital ratios in the wake of the financial crisis, when eurozone governments were called upon to bail out some institutions.

The ECB figures indicate that additional deleveraging may still be needed.

The data showed that the share of total loans in bank assets dropped in the majority of euro area countries, "especially in 2011 and 2012 amid weakening macroeconomic conditions and increased pressure on banks to deleverage.

"In some cases, this was also due to transfers of distressed loans to asset management companies or 'bad banks'," the ECB wrote.

The decline in the volume of assets "was accompanied by a decrease of 10 percent in the number of credit institutions, from 2,909 to 2,645," over the same period, the ECB continued.

German banks led the banking sectors in the euro area with 7.6 trillion euros in total assets by the end of last year, followed by the French banking sector, which had assets of 6.8 trillion euros.

Spain and Italy's banking sectors came in well under, with 3.9 trillion euros and 2.9 trillion euros in total assets respectively.

Banks had also increased their capital buffers, with the key Tier 1 capital ratio increasing to 12.7 percent in 2012 from 8.0 percent in 2008.

"This report is an important step towards understanding the changes in the euro area banking sector at an aggregate level," said ECB vice president Vitor Constancio.

"It provides an important base for the work we are doing in preparation for becoming the euro area's single supervisor."


© 2013 AFP

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