Financial reporting of European banks: benchmark study 2024

We have analysed the 2023 year-end reports of 26 banks in 12 European countries to understand better the impact of financial turbulence and ongoing geopolitical crises on their Expected Credit Losses. This study is the eighth in its series and follows from previous editions of the report since its launch in 2020.

A focus on Expected Credit Losses

The study mainly focuses on the ECL-related impacts, with key findings on:

·       ECL charge impact of YE 2023 on the profit or loss and ECL allowances

·       ECL allowances: changes in coverage ratios and allocation between stages

·       Post-model adjustments/overlays

·       Forward-looking information

Małgorzata Pek, Partner of Forvis Mazars in Poland in charge of audit, advisory and financial services comments: 

“The results of our latest report indicate a growing optimism in the European banking sector in the area of credit risk. The level of ECL coverage ratio in the surveyed population of Europe's largest banks was 1.36% in 2023, and has been on a downward trend continuously since Covidian 2020, when coverage reached a record high of 1.83%.

A comparison of the level of coverage between banks from different European countries provides interesting conclusions. Among other things, the report shows that Spanish banks are still more conservative than the European average, in contrast to British banks, where the trend is consistently below the average.

Significantly, the share of post-model adjustments in the total value of ECL allowances, which now account for 12% of such allowances, is declining, even though all banks analyzed still maintain such adjustments. This is usually due to the implementation of adjustments directly in risk models. It is worth noting that the Polish regulator, the Office of the Polish Financial Supervision Authority, has also indicated in Recommendation R that model adjustments can only be applied in exceptional cases and be temporary in nature.”