Tag: European banks

How banks in Europe are managing bad loans, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Credit crunch was beginning to become a major problem for banks in Europe, however, they seem to have found a way to tackle the issue.

Non-performing assets in European banks were piling up due to COVID-19. As of the second quarter of 2020, the NPA ratio for all banks in the region was at 2.8%, up 0.2 percentage points from a year ago.

According to reports, banks set aside lower provisions for potential loan losses in the second quarter of 2021, with UK banks booking significant reversals. Booking reversals here means that overall funds that accounted for bad loans shrank, making risk from bad loans manageable, according to analysts.

According to data by S&P Global Market Intelligence, 12 of the 25 largest banks in Europe booked reversals, and loan loss provisions have been put aside to cover potential costs arising from defaulting loans.

Of the 12 — Barclays PLC, NatWest Group PLC, Lloyds Banking Group PLC, HSBC Holdings PLC and Standard Chartered PLC — are based in the UK, with Barclays releasing the highest amount of 911 million euros, according to their data.

So far, banks have not seen a surge in bad loans. However, with talks of central banks moving towards tapering COVID-19 support, the market expects deterioration in asset quality.

This is likely to be more visible in 2022 and will happen gradually rather than suddenly since the measures will not end all at once, DBRS’ Rivas told S&P Global.

If banks do need top-up provisions due to additional bad loans in pandemic-affected sectors, the risks would likely be against earnings rather than capital, said S&P Global Ratings’ Edwards.

Click here to read more stories on banking



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,

European banks book 20 billion euros, or 14% of their profits, in tax havens annually, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Europe’s biggest banks are booking an average of 20 billion euros ($23.7 billion) in tax havens every year, which is about 14% of their profits, according to a report by report from the EU Tax Observatory.

The report looked into the activities of 36 systemic European banks, headquartered in 11 countries across Europe, that have been subject to mandatory country-by-country reporting on their actions since 2015.

The tax havens looked into include Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Gibraltar, Hong Kong, Ireland, Isle of Man, Jersey, Kuwait, Luxembourg, Macao, Malta, Mauritius, Panama and Qatar.

About 25% of the banks’ profits were booked in countries where the effective tax rate was lower than 15%.

“Bank profitability in tax havens is abnormally high: 238,000 euros per employee, as opposed to around 65,000 euros in non-haven countries,” the authors added. “This suggests that the profits booked in tax havens are primarily shifted out of other countries where service production occurs.”

The profits

HSBC booked a mean 58% of its pre-tax profits in tax havens between 2014 and 2020, according to the study, making it the lender funneling the largest percentage of profits into the EUTO’s list of tax havens.

Standard Chartered booked an average of around a third of its pre-tax profits in tax havens, according to the report, while Deutsche Bank, Nord LB and RBS all booked, on average, more than 20% of their pre-tax profits in tax havens between 2014 and 2020.

Bankia BFA, Erste, Nykredit Realkredit, Swedbank and Banco Sabadell booked none of their profits in tax havens during the seven-year sample period.

Curbs needed

Taxes have become a sensitive issue, with cash-strapped governments plugging holes in the economy due to COVID seeking to agree on a common rate for taxing Big Tech, in particular.

Country-by-country reporting to shed light on the inner workings of banks has failed to change behaviour despite the rise of tax issues on the public agenda, the report said.

“More ambitious initiatives — such as a global minimum tax with a 25% rate — may be necessary to curb the use of tax havens by the banking sector.”



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , , , ,

European banks ready payments system to rival Visa, Mastercard, BigTech, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


A few large European lenders have teamed up to create a new European payment system, to compete with the US and Chinese systems and protect sovereignty in an important area of consequence.

The European Payments Initiative (EPI), previously known as the Pan-European Payments System Initiative (PEPSI), is a European Central Bank-backed payment-integration initiative aiming to create a pan-European payment system and interbank network to rival Mastercard and Visa, and eventually replace national European payment schemes such as France’s Carte Bancaire and Germany’s Girocard.

It is supported by the European Commission, and currently comprises 30 major European banks (including all the major French banks, Deutsche Bank and Commerzbank in Germany, Santander Bank in Spain and Intesa Sanpaolo and UniCredit in Italy.

It is tasked with creating a pan-European payments service that can be used to pay online as well as in stores, to settle bills between individual consumers and to withdraw cash at ATMs.

The rationale

EPI is born out of the need to protect the sovereignty and break a US-dominated “oligopoly” on payments.

In July 2020, a group of 16 major European banks from five euro countries announced the launch of the EPI with the aim to create a unified payment solution for consumers and merchants across Europe.

The realisation that a US president on any given day could decree Mastercard or Visa should no longer do business with a certain part of the population has prompted the initiative.

Europe’s banks are considering their own interests, aware that if they do not act now they could be challenged by tech companies such as Apple and Google, which are increasingly preying on their turf.

Today, four in five transactions in Europe are handled by Mastercard and Visa, according to EuroCommerce, a lobby group of European retailers.

While on the other side of the table, the banks and acquirers driving EPI process more than half of all EU payments.

The critical mass of business brought by banks such as Deutsche, BNP Paribas, ING, UniCredit and Santander give the EPI weight. The Brussels-based entity has until September to draw up a blueprint. If the banks behind EPI then give the green light, the first real-world applications could be launched in early 2022.

The hurdles

For a system to work, merchants should be ready to accept payments and users ready to make payments. . Having both in place at the same time is not an easy task, particularly since the full rollout could take years, and a bad start could kill EPI’s chances of success.

EPI’s backers have forked out €30 million to fund the initial development of a blueprint, but short of the “billions of euros” that are necessary. . One way to defray the costs could be to tap EU funds.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

Green’ to be soon the colour of money for European banks, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


The European Union is working on new rules where banks will have to state the “greenness” of their activities, or what share of their business is financing climate-friendly activities — a move that would impact profitability in an increasingly environmentally conscious world.

The so-called green asset ratio (GAR) measure is meant to help inform stakeholders — including investors, employees and depositors — of a bank’s commitment to disinvesting from fossil fuels by revealing what proportion of its assets are environmentally sound.

How would it work

Depending on its relative shade of green, a lender’s funding costs could be at stake, as well as its ability to retain talent and its attractiveness to customers. Unlike banks’ other complex financial metrics, a green label may resonate with a much broader public that’s increasingly conscious of companies’ role in society.

However, there is a lot of uncertainty around what will be included in the GAR. If too many banking activities are included it may unnecessarily hit some lenders, and if only a few are included there is danger of “greenwashing.” Also, the banks may shift dirty business to where it isn’t captured in the GAR.

While the European Union proposed measuring green assets against banks’ entire activities, including derivatives, the European Banking Authority has a different view. It favours excluding derivatives entirely from the calculation and reporting so-called “capital markets indicators” separately.

The EBA’s proposal could let banks off the hook on climate change by possibly flattering their green asset ratios. Derivatives are a significant and somewhat risky part of investment banking so their inclusion in the GAR would make a difference. Worse, some lenders might take on greater risk by structuring non-green deals as derivatives to keep them out of the GAR calculations.

Where do European banks stand?

French banks are known for dominating their home market, but they’re considered also-rans on the global stage when compared with US lenders. That’s not the case in the world of green banking. Credit Agricole is the leading underwriter of green bonds, three places ahead of the much larger JPMorgan since the end of 2015, according to an analysis on activity from almost 140 banks around the world by Bloomberg. Two other Paris-based banks, BNP Paribas and Societe Generale, rank in the top 10 in the league table.

French banks were early in identifying green lending as a way to differentiate themselves from their rivals, said Maia Godemer, a London-based researcher at BloombergNEF, a clean-energy think tank. Green debt offerings have been steadily increasing for the past five years, and 2021 is shaping up to be the biggest yet. Issuers have sold more than $187 billion of green bonds so far in 2021, almost triple the pace from the year-earlier period.

A renewable energy market

The underwriting market for renewable-energy companies is minuscule when compared with the funds that fossil-fuel companies are raking in. Since the start of 2016, renewable-energy producers have raised less than $160 billion in the debt markets, compared with the $3.6 trillion for non-renewable energy producers, according to Bloomberg data. This year, when one would expect the spread to be narrowing, green energy providers have received less than $10 billion from bond sales and loans, while fossil-fuel companies got almost $190 billion. The leading lenders to renewable-energy companies since 2016 include Japan’s Mitsubishi UFJ Financial Group, BNP Paribas and Australia & New Zealand Banking Group. Bank of America was the top U.S. bank, placing 11th in the league table.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,