Interest rate increases are improving banks' results, but also increasing risks. To mitigate them, European entities must increase the percentage of good quality capital over all assets, known as Tier 1, to 9%, according to the Basel III supervision report published today by the European Banking Authority (EBA). .
The increase collected by the organization chaired by José Manuel Campa is due above all to the increase in risk and must be reached in 2028. For banks with international projection, the increase will be 10%, while for systemic ones, among which Santander, 16%.
Apparently, it is not a great demand when compared to the current situation of the banks. The EBA itself recognizes that European banks are already above the required levels and that, to achieve the 9% increase, they would barely have to add 600 million euros to their quality capital.
Another thing is what the interest rate increases of the European Central Bank (ECB) and their effects on the financial system may bring. Both the EBA and the other two European banking supervision entities, the EIOPA and the ESMA, have warned in a recent report that there are risks associated with bonds, liquidity and credit.
For now, the EBA now indicates, "the second mandatory exercise of Basel III shows a significantly reduced impact on European banks, with the shortfalls almost absorbed." The exercise has been carried out on 157 banks.
The European authority does not offer information on each bank, although this summer it subjected Spanish entities, along with those in the rest of the euro zone, to its stress tests to check how they would react in an adverse scenario. The exercise affected 70 European entities.
The Spanish banks subjected to the stress test were Santander, BBVA, CaixaBank, Banco Sabadell, Bankinter, Unicaja Banco, Kutxabank and Abanca. All of them showed satisfactory capital levels in the adverse scenario, despite the "severity" of the new financial scenario.
The European Central Bank (ECB), which has called for caution from banks when distributing dividends and buying back their own shares, also recently carried out a stress test among 41 banks in the euro zone.
The Bank of Spain considers that the "initial situation" of Spanish banks is good for now. "They start with income and profitability levels higher than those of 2021, which, together with a higher quality of assets with lower ratios of doubtful assets, represents a better situation," he indicates.
