ECB 2024 aggregated SREP results report

These risks are often not priced into financial markets until they materialise, making resilience to shocks a key supervisory priority.

The average SREP score remained stable at 2.6, while overall capital requirements stood at 15.6% of Risk-Weighted Assets (RWA). Profitability improved, with an aggregated return on equity of 9.3% in 2023, although supervisors remain cautious due to slowing net interest income and structural cost challenges. The non-performing loans (NPL) ratio remained broadly unchanged at 2.3%, but supervisors are alert to potential increases as economic conditions evolve. Internal governance, risk management and cyber resilience continue to be supervisory priorities, with a strong focus on remediating deficiencies and ensuring regulatory compliance.

Score developments

SREP scores for euro area banks showed overall stability, averaging 2.6, although distribution shifted within score categories. The share of banks with scores of 2-, 3+, and 3 rose to 76%, while those at 2, 3-, and 4 declined to 23%.

• Stable scores: 74% of institutions remained unchanged from 2023.
• Improvements: 15% recorded better scores, driven by profitability gains in a favourable economic environment.
• Deteriorations: 11% worsened, often due to weaknesses in risk data aggregation, reporting, and governance.

Key factors shaping outcomes included:

• Credit risk: Rising vulnerabilities in commercial real estate exposures.
• Interest rate risk in the banking book (IRRBB): Adverse effects from interest rate volatility.
• Profitability: Stronger earnings reduced market volatility impacts.

By risk area, improvements were observed in business model, governance, liquidity, market risk and capital, while deterioration occurred in IRRBB, credit risk and operational/IT risk. Sector differences persisted: asset managers, custodians and some lenders received strong scores, while retail and consumer credit lenders and diversified lenders often scored 3+ or worse due to governance and risk management deficiencies.

Capital requirements

The 2024 SREP led to a modest increase in capital requirements and guidance for 2025, rising from 15.5% to 15.6% of RWA.

• Capital ratios: The total capital ratio reached 19.9%, with a CET1 ratio of 15.81% in Q2 2024.
• Pillar 2 Requirements (P2R): The total capital P2R edged up to 2.1% of RWA, with the CET1 P2R at 1.2%.
• CET1 levels: Average CET1 capital increased to 11.3%, broadly in line with pre-pandemic levels.

Differences emerged by business model: small market lenders, corporate/wholesale lenders and G-SIBs faced the highest requirements.

Additional measures included:

• Leveraged finance add-ons applied to nine banks.
• P2R leverage ratio add-ons for 13 banks.
• Non-performing exposure (NPE) add-ons for 18 banks, reflecting inadequate provisioning for aged NPEs (RWA-weighted average shortfall of 5bps).

The weighted average leverage ratio stood at 5.8% in Q2 2024.

Credit, governance & capital adequacy deficiencies

Qualitative measures were imposed on 97 banks, targeting deficiencies in:

• Credit risk (29%) – affecting 71% of banks, nearly half of which related to NPLs.
• Internal governance (23%) – including weaknesses in risk data, reporting, and board oversight.
• Capital adequacy (11%) – often linked to insufficient capital planning.

While the overall number of measures declined compared with the previous cycle, those concerning credit and operational risk increased, reflecting supervisory concern over cyber resilience and data management.

The distribution was uneven: diversified lenders and G-SIBs received the highest average number of measures (around six each), while banks with weaker SREP scores (3 or 4) faced more governance and liquidity-related measures.

Future outlook

The European banking sector remains resilient but faces headwinds from:

• A slowdown in net interest income
• Cost pressures and operational inefficiencies.
• Strategic execution weaknesses.
• A deteriorating outlook for core lending activities.

Although the NPL ratio is still historically low, it has begun to edge upward. Supervisors will continue to promote prudent risk-taking, strong governance and proactive management to ensure banks remain capable of supporting the real economy through uncertainty.

How can we help?

Our prudential risk experts understand that regulation continues to shape the strategic priorities of financial institutions. We specialise in helping clients across the financial services sector navigate complex supervisory requirements. Working in close partnership, we help firms identify their regulatory obligations, close governance and risk management gaps, and design strategies that achieve full compliance while supporting sustainable business models.