AFME Prudential Data Report Q2 2021 | AFME

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Data Research
AFME Prudential Data Report Q2 2021
08 Sep 2021
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Author Julio Suarez Director
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This report collates information on European GSIBs’ prudential capital, leverage and liquidity ratios with updated statistics as at 30 June 2021.

It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe as at August 2021. 

Among the main findings of this report:


  • CET1 and T1 capital ratios slightly decline in Q2 2021: European GSIBs end-point CET1 ratio slightly decreased from 14.44% in 1Q21 to 14.36% in 2Q21. 

    The decline in CET1 and T1 ratios was driven by a quarterly increase in RWAs of a larger magnitude than that of CET1 capital and T1 capital. Banks reported an increase in credit risks RWAs on the back of a surge in client demand, M&A and asset consolidation, and regulatory impact from the finalization of the euro area Targeted Review of Internal Models (TRIM).
  • CoCo borrowing costs continue at record low: Average coupon rates of newly originated CoCos continued at 4.3% in 3Q’21, virtually the same level observed in 2Q 2021. The level, however, is significantly below that observed in 2Q 2020 (5.9%) and 2020FY (5.1%).

    CoCo option-adjusted spreads (OAS) have also stabilised over the last four months at c300bps, which, however, accumulates a decrease of more than 500bps from the record high levels observed at the end of Q1 2020.
  • Stress tests results and resumption of dividend distribution in the EU, UK and the US: The Box on pages 21-26 discusses the latest stress test results undertaken by EU, UK and US banking supervisors. 

    Although the stress scenarios vary by jurisdiction and therefore the results may not be directly comparable, the results confirm the resilience of the global banking system even in the current fragile macroeconomic circumstances as the global economy recovers from the economic effects of the pandemic.

    The stress tests results also support the policy decision recently taken across the three jurisdictions by lifting restrictions to banks’ dividend distributions. Banks’ resilience continues even after taking account of the impact from extremely harsh assumptions.