On 19 September 2018, the European Banking Authority (EBA) published their fourth annual report on asset encumbrance (the Report). There was a slight increase in the level of asset encumbrance across the EU in 2017 compared to previous years, with particularly high levels noted in jurisdictions with established covered bond markets (e.g. Sweden), and those with a high share of repro financing or high collateral requirements for over-the-counter derivatives (e.g. UK).

Countries severely affected by the sovereign debt crisis are noted as having high, but decreasing encumbrance levels (e.g. Greece). The overall rise in the aggregate asset encumbrance ratio was driven by small increases in some jurisdictions with large banking sectors (e.g. Germany / UK). The EBA notes that the modest increase in the level of asset encumbrance in 2017 is not a cause for concern – however the availability of collateral for central bank funding should be monitored to investigate changes in funding structures across the EU.

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