On 19 September 2018, the European Banking Authority (EBA) published a report on EU banks’ funding plans (the Report). The report analyses trends in the market to assess the feasibility of banks’ funding plans submitted to the EBA.
Most banks expect their assets to grow by 6.2% until 2020, driven primarily by household loans and non-financial corporate loans. In this same period, banks plan to increase total liabilities and equity, driven by an increase in client deposits and long-term debt securities. Banks have also assumed that their costs of long-term market-based funding in 2018 will remain at 2017 levels. However, market analysts’ expectations suggest an increase in funding costs in 2018.
In assessing last year’s funding plans, most banks missed their targets for 2017 by a large margin, the EBA advises competent authorities to investigate the reasons behind these divergences. Moreover, regulators and supervisors should monitor and assess the impact of changes in monetary policy stances on banks’ funding, as the expected increase in issuance volumes in 2019 and 2020, combined with the curbing of central banks’ support measures, is likely to increase banks’ funding costs.