Financial Stability Report - Financial Risk and Stability Network

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3.5 BANKS’ CAPITAL AND PROFITABILITY
Banks’ capital position
strengthens further
In the second half of 2012 the fourteen main listed banking groups continued to
strengthen their capital positions. e improvement, although small, was due to
their risk-weighted assets contracting more than their capital. eir highest quality
capital was adversely aected by the losses recorded in the period. e reduction in risk-weighted assets
stemmed partly from the banking groups’ portfolio rebalancing in favour of assets attracting lower
capital charges. Some of the largest groups also completed the switch to internal models for the
calculation of capital charges or expanded the scope of their application, thus completing a process
initiated some time ago and monitored by the Bank of Italy.
By December 2012 the core tier 1 capital ratio of the fourteen main listed groups had risen on
average to 10.5 per cent, from 10.2 per cent in June 2012 (Figure 3.14). eir tier 1 and total capital
ratios were respectively 11.1 and 14.1 per cent. e preliminary results of the stress tests carried out
on the Italian banking system under the IMF’s Financial Sector Assessment Program (FSAP) show
that the capital strengthening achieved allows the system as a whole to withstand adverse shocks. 4
12
11
10
9
8
7
6
Banking groups’ core tier 1 ratios
(per cent; end-of-period data)
(a) 14 main listed banking groups (b) Other groups
2010 2011 2012 2012
Source: Consolidated supervisory reports.
Median hted avera Interq
e capital ratios of the largest Italian groups remain slightly lower than those of the major European
banks, which in several cases have beneted from large-scale public support. However, Italian banks’
nancial leverage, measured as the ratio of total balance-sheet assets to tier 1 capital, is lower − 18 as
against a European average of 23 in June 2012. When assessing capital adequacy, one must take account
of the manner of calculating risk-weighted assets, which are higher for Italian banks in proportion to
total assets (see the box “International banks’ risk-weighted assets”).
4 See the IMF’s press release of 26 March 2013: http://www.imf.org/external/np/sec/pr/2013/pr1394.htm.
INTERNATIONAL BANKS’ RISK-WEIGHTED ASSETS
12
11
10
9
8
7
6
Figure 3.14
Financial Stability Report No. 5, April 2013 BANCA D’ITALIA
16
14
12
10
8
6
2010 2011 2012 2012
e methods used to calculate risk-weighted assets have been studied by regulators and analysts for
some time (see the box “e risk-weighted assets of Italian banks”, Financial Stability Report No.
4, November 2012). e comparability of the measures of banks’ capital may be undermined by
discrepancies in risk-weighted assets caused by dierences in the models used by banks or in the