Increase in the asset encumbrance ratio amidst extensive use of central bank facilities

The European Banking Authority (EBA) published today its annual report on Asset Encumbrance. As COVID-19 spread across Europe and activity in primary markets froze, banks made extensive use of central bank liquidity facilities to build precautionary liquidity buffers. In this context, the asset encumbrance ratio rose substantially in the first half of 2020.

• After decreasing by 80bp in 2019 to 25%, in the first half of 2020, the asset encumbrance ratio went up to 27.5%.
• In the first half of 2020, the volume of total assets and collateral received rose by almost 10% while encumbered assets and collateral increased by more than 20%.

The entire report can be found here.