EBA欧洲银行-EBA-Report-on-Asset-Encumbrance-July-2017_18页_688kb

EBA Report on Asset Encumbrance (July 2017)

Executive Summary

This is the third annual EBA report on asset encumbrance, focusing on the composition of funding sources across the EU. The report uses data from December 2014 to December 2016, with the most recent data from December 2016. The asset encumbrance ratio increased slightly to 26.6% in December 2016, compared to 25.4% in December 2015 and 25.1% in December 2014. The increase was due to a rise in both encumbered assets and collateral, with the highest levels of encumbrance reported by specialised mortgage institutions (80–90%).

Key factors influencing encumbrance levels include:

• Covered bond markets (e.g., Denmark and Sweden)
• Central bank funding in countries affected by the sovereign debt crisis (e.g., Greece and Cyprus)
• Repo financing and collateral requirements for over-the-counter derivatives (e.g., the UK)

The report highlights that while some countries showed a decrease in encumbrance levels, others, particularly those with large banking sectors, saw small increases, contributing to the overall rise. The share of central bank funding as a source of encumbrance decreased slightly to 8% in December 2016.

Core Content

Total Encumbrance

• The weighted average asset encumbrance ratio for the EU was 26.6% in December 2016.
• This represents a 1.2% increase from December 2015.
• Encumbered assets and collateral amounted to EUR 6.8 trillion and EUR 3.8 trillion, respectively, in December 2016.
• The ratio of encumbered assets and collateral to total available assets and collateral increased due to a rise in the volume of encumbered collateral.
• The distribution of the ratio among banks was wide, ranging from below 2% to above 58%.

Encumbrance by Country

• Countries with large and established covered bond markets (Denmark, Sweden) reported higher encumbrance ratios.
• Greece and Cyprus showed a reduction in encumbrance levels, especially in reliance on central bank funding.
• Italy and the UK were key contributors to the overall increase in the encumbrance ratio.
• The EU average for asset encumbrance was 26.6%, with Denmark at 55% and Greece at 43%.
• Finland saw a drop in the ratio, returning to 2014 levels.

Encumbrance by Asset Class

• Loans and debt securities make up the largest portion of encumbered assets and collateral, each accounting for 42%.
• Loans and advances other than loans on demand increased as a share of encumbered assets over the past two years, while debt securities decreased as a share of unencumbered assets.
• Nordic countries (Denmark and Sweden) had particularly high shares of encumbered loans and advances, around 80%.
• Central bank eligible assets showed an increase in encumbrance from 42% in December 2015 to 44% in December 2016.

Sources of Encumbrance

• Repos remained the main source of encumbrance, accounting for 39% in the UK and 32% in Italy.
• Over-the-counter derivatives increased to 10% in December 2016.
• Covered bonds rose to 21% of total sources of encumbrance.
• Central bank funding decreased to 8% of total sources, indicating a possible improvement in funding conditions in some countries.

Encumbrance by Maturity

• A large share of assets and collateral were encumbered with open maturity or very short maturity (up to two weeks).
• Long-term encumbrance (>10 years) increased, aligning with the rise in covered bond issuance.
• The data showed high volatility for short-term maturities, while long-term encumbrance followed more stable trends.

Key Findings

• The overall asset encumbrance ratio increased by 1.2 percentage points over the year.
• Specialised mortgage institutions had the highest encumbrance levels (80–90%).
• Covered bonds and over-the-counter derivatives became more significant sources of encumbrance.
• Greece and Cyprus showed a reduction in encumbrance, especially in central bank funding.
• Central bank eligibility is a proxy for asset marketability, and the encumbrance of central bank eligible assets increased to 44% in December 2016.
• The report warns of the need to monitor collateral availability and funding structures as official sector funding is reduced.

Conclusion

The modest increase in asset encumbrance across the EU is not considered an immediate cause for concern. However, the rising use of over-the-counter derivatives and the changing reliance on central bank funding indicate a shift in the funding structure that warrants continued monitoring. The EBA's report underscores the importance of understanding the dynamics of encumbrance in assessing the broader implications for the banking sector's access to unsecured instruments.