The data shows further resilience in the EU banking sector amid a benign macroeconomic and financial environment, with an additional strengthening of the capital position, an improvement of asset quality and a slight increase of profitability.
The NPL ratio of EU banks has decreased from 5.4% (as of June 2016) to 4.5%, due to the decline of NPLs, reflecting progress made by EU banks to clean-up their balance sheet. However, around one-third of EU jurisdictions have NPL ratios above 10% and the level of NPLs still remains at a very high historical level (EUR 893Bn). Further progress on NPLs is needed whilst the long-term sustainability of prevailing business models remains a challenge.
In the fast-changing environment, new and high risks have emerged, which cyber and data security among the most challenging ones for the EU banking sector. In addition, risks posed by cyberattacks, their volume and sophistication are unabatedly high. While banking operations have become increasingly dependent on IT platforms, cost pressures and operational challenges have contributed to an increasing reliance on third party service providers that a range of IT services and data are outsourced to.
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