EU banks better capitalised in 2015

EU-wide banks have improved their capital positions in 2015, though banks must increase efforts to reduce bad loans, the European Banking Authority (EBA) said in a new report published Tuesday.

"This transparency exercise, the EBA's fifth annual release of consistent bank by bank data, demonstrates an increasing resilience in the EU banking sector as capital levels have strengthened further," said Piers Haben, director of oversight at EBA, in a statement.

"Nonetheless, EU banks will need to continue addressing the level of non-performing loans which remain a drag on profitability," he added

The EBA's report covered 105 banks based in 21 European countries which amounts to 70 percent of banking activity in the European Union, for the period from late December 2014 to end June this year.

It showed that in general European banks strengthened their capital positions by raising additional equity and retaining earnings, "placing them in a better position to increase lending to the real economy," said the authority based in London.

The average core equity ratio of capital to risk-weighted assets rose to 12.8 percent as of June 2015, it said.

While profitablity has improved, it remains weak by historical standards weighed down by bad debt at close to 6.0 percent of total loans.

Regarding sovereign debt, EBA said the data showed that "a home bias when investing in sovereign debt is still relevant although gradually receding, as banks reported in June 2015 an increase in their holdings of non-domestic sovereign debt."