EU/EEA banks display strength amid a challenging risk environment

• They report robust capital and liquidity positions
• Lending continues to grow while asset quality remains strong
• Exposures to the IT sector are limited with no signs of deteriorating quality
• Profitability is high, supported by high revenues

The European Banking Authority (EBA) today published its Risk Dashboard for the second quarter of 2026. It summarises the main risks and vulnerabilities of the EU/EEA banking sector based on supervisory reporting data.

EU/EEA banks continue to operate from a position of strength in a very uncertain environment. They display robust capital and liquidity buffers, continued lending growth with sound asset quality, resulting in high profitability. Unabating geopolitical tensions , buoyant financial markets and difficult macroeconomic conditions however require close monitoring.

Capital and liquidity buffers remain strong

EU/EEA banks' Common Equity Tier 1 ratio stands at 16.1%.The slight decrease from the previous quarter (16.2%) reflects an increase in risk-weighted assets. Nevertheless, with around 430 bp of headroom above regulatory capital requirements (unchanged from last year), banks have substantial capacity to absorb shocks.

Liquidity positions also remain strong, with a Liquidity Coverage Ratio (LCR) of 158.5% and a Net Stable Funding Ratio of 125.7%. Both ratios are well above minimum requirements and stable quarter-on-quarter. Banks' high-quality liquid assets (LCR's numerator) show a continued increase in sovereign bonds (+8.7% during the first half of 2026) and decrease in cash balances.

As lending keeps growing and asset quality also appears still very sound

Loans to households have increased by 5.2% year-on-year (1.7 % quarter-on-quarter) and lending to non-financial corporations by 6.3% year-on-year (1.7% quarter-on-quarter). Lending growth is however uneven across countries, with robust expansion in some and only modest growth or even contraction in others.

Asset quality remains strong. EU/EEA banks' non-performing loan ratio stands at 1.8% and the share of Stage 2 loans in total loans has declined further to 8.9%. Situations however differ across countries, sectors and portfolios. Direct exposures to the IT sector account for 4% of corporate lending only (ca. 1.9% of total client lending), with no signs of deteriorating quality.

EU/EEA banks continue to report solid profitability

Return on equity (RoE) stands at 11.3%, compared with 10.7% a year earlier. The increase was mainly driven by net interest income, which has increased was due to both robust loan growth and widening net interest margins. The latter rose to 1.63% from 1.58% a year earlier. Net fee and commission income have also contributed to the RoE increase, though less than net interest income. Banks have kept costs broadly stable, implying a decline in the cost to income ratio from 52.5% to 51.5% on a yearly basis.

Funding conditions remain easy