EBA has published its annual report on asset encumbrance
The EBA observes an increasing charge ratio in 2021, albeit with some signs of stabilisationThe European Banking Authority had published its annual report on asset encumbrance. The report highlights that banks continued to draw heavily on central bank money in 2021. As a result, the overall encumbrance ratio increased by 2.2 percentage points to 29.1% in 2021. Other findings include:
- Following the outbreak of the COVID-19 pandemic, the upward trend in the encumbrance ratio continued but remained roughly stable in the second half of 2021.
- Banks continued to draw heavily on central bank funds, and more than 50% of their central bank-eligible assets and collateral are now encumbered.
- Rising encumbrance ratios could lead to negative feedback loops, resulting in higher encumbrance and higher funding costs.