EBA Long Report - European Banking Authority - Europa

Asset deleverage is an element of
your strategy.
a. If yes:
i. It was required or suggested by
national supervisors.
ii. It is part of the EU State Aid
conditions.
iii. It was decided by your bank
independently.
More severe deleveraging has been occurring this year in financially-stressed countries and this trend
is set to continue, as local banks have been facing funding shortages (including in some cases
negative deposit flows) and especially weak credit demand stemming from recessionary economies.
On a selective basis, some banks which have been unable to adjust their business models and
balance sheets (including levels of capital) to the new realities have started deleveraging.
As long as EU economies remain either in recession or modest growth, it is unlikely that bank lending
will resume to higher levels. At the same time, if credit demand revives, economies cannot be
expected to pick up sustainable growth without more vigorous bank lending. Breaking this negative
loop is a function of restored market confidence and better regulatory clarity (the former being to some
extent a function of the latter), which will enable banks to resume normal funding for growth and target
the appropriate strategies to that effect.
In the RAQ, a majority of respondents were deleveraging for both ‘private’ drivers as described earlier,
i.e. their own business strategy reasons, and in some cases official requirement or encouragement, as
figure 10 below shows.
Figure 10: Deleverage (source: RAQ)
30
25
20
15
10
5
Deleverage
0
agree/mostly agree
Further de-risking and capital constraints are the most popular reasons cited in the RAQ responses in
Figure 11 below.
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