Financial reporting of European banks: benchmark study 2024
Our benchmarking study, now in its seventh edition since its inception in 2020, analysed the year-end reports of 26 banks across 11 European countries, including Irish banks AIB and Bank of Ireland. This study aims to provide a comprehensive understanding of Expected Credit Losses (ECL) amidst ongoing economic uncertainty.
Key findings
- ECL Charge Impact: Analysis of the year-end 2023 ECL charge impact on profit or loss and ECL allowances.
- Coverage Ratios and Stage Allocation: Examination of changes in coverage ratios and allocation between different stages across various institutions.
- Post-Model Adjustments (PMAs): Assessment of the share of post-model adjustments in the total ECL.
- Forward-Looking Information: Integration of macroeconomic forecasts into forward-looking information.
- Irrevocable Payment Commitments (IPCs): Exploration of IPCs to the Single Resolution Board as a side topic.
Irish banks specifics
- ECL Coverage Ratio: The ECL coverage ratio for amortized cost (AC) loans decreased from 1.40% in 2022 to 1.36% in 2023. Irish banks specifically saw a reduction in their coverage ratios, now at 1.5% and 2.2% compared to year-end 2022, nevertheless still above the average.
- Stage 3 ECL Coverage: Irish banks demonstrated a decrease in Stage 3 ECL coverage ratios, while changes in Stage 1 and Stage 2 ratios did not follow a clear pattern.
- Loan Allocation: Irish banks still allocate fewer loans to Stage 1 compared to their peers, with a higher proportion of loans categorized under Stage 2 and Stage 3.
- GDP Growth Projections: All participating banks, including those in Ireland, anticipate optimistic GDP growth in the coming years, aligning closely with ECB projections and exceeding those of the BoE.
- Overlays in ECL Allowances: The average weight of cumulative overlays in final ECL allowances stands at 12% for year-end 2023, down from 14% in 2022. Irish banks exhibit varying approaches to PMAs, with overlays accounting for 7% to 35% of total ECL.
- Scenario Weightings: Irish banks tend to adopt a conservative approach to scenario weightings, with downside scenarios weighted at 40% and 35%, higher than most peers.
Learn more
For a detailed analysis, you can download the full "Financial Reporting of European Banks – Benchmark Study YE 2023" here.
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Cian Higgins Director, Head of Quantitative Solutions Dublin
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Financial reporting of European banks 2024
Our benchmarking study, now in its seventh edition since its inception in 2020, analysed the year-end reports of 26 banks across 11 European countries, including Irish banks AIB and Bank of Ireland. This study aims to provide a comprehensive understanding of Expected Credit Losses (ECL) amidst ongoing economic uncertainty.