{"id":16456,"date":"2026-09-14T13:26:49","date_gmt":"2026-09-14T13:26:49","guid":{"rendered":"https:\/\/outsourcing-today.ro\/?p=16456"},"modified":"2026-09-14T13:26:57","modified_gmt":"2026-09-14T13:26:57","slug":"forvis-mazars-european-banks-show-credit-risk-stability-amid-persistent-uncertainty","status":"publish","type":"post","link":"https:\/\/outsourcing-today.ro\/?p=16456","title":{"rendered":"Forvis Mazars: European banks show credit risk stability amid persistent uncertainty"},"content":{"rendered":"\n<p>Forvis Mazars Group, the international audit, tax and advisory services partnership, has released the latest edition of its <a href=\"https:\/\/www.forvismazars.com\/ro\/en\/insights\/publications\/economic-publications\/european-banks-benchmark-study-2026\">Financial reporting of European banks study<\/a> based on expected credit losses (ECLs) disclosed in 2025 annual reports by leading European banks. It found banks remain in a stable and resilient credit risk position, despite ongoing macroeconomic uncertainty.<\/p>\n\n\n\n<p>Key findings:<\/p>\n\n\n\n<ul><li>No general deterioration in credit risk was observed in 2025. Key indicators, including coverage ratios and post-model adjustments or management overlays, continued to decline slightly and show reduced dispersion compared to previous years.<\/li><li>Gross credit exposures increased by 3.0%, mainly in Stage 1 assets, while ECL allowances declined by 1.9%. This dynamic contributed to a lower average coverage ratio for loans at an amortised cost of 1.20% (vs 1.26% in YE&nbsp;2024 and 1.57% in YE&nbsp;2019).<\/li><li>Profitability trends remain moderately positive as operating profit increased for most banks (18 of 26), although growth slowed compared to the previous year (8% vs 20%). The average ECL charge in operating profit remains quite stable at 13% (vs 12% in YE&nbsp;2024).<\/li><li>The share of post-model adjustments or management overlays in total ECL allowances continued to decrease to 9% (vs 10% in YE&nbsp;2024 and 12% in YE&nbsp;2023), confirming a gradual normalisation since the pandemic peak and increased reliance on model-driven estimates.<\/li><\/ul>\n\n\n\n<p>Based on data published in the annual reports of 26 European banking groups prior to 1 April 2026, the study found that the main credit risk indicators continued to decline, albeit at a more moderate pace, with a trend towards stabilisation observed both in their levels and in the degree of dispersion across banks. These developments suggest that European banks remain well positioned to withstand potential future economic shocks.<\/p>\n\n\n\n<p>As operating profit increased, the average ECL charge also grew by 14%, with ECL representing around 13% of operating profit (up from 12% in 2024). Credit costs therefore remain manageable but have started to rise slightly. However, changes in ECL charges were mixed, with 16 banks reporting an increase and 10 banks a decrease, highlighting varied risk dynamics across the continent.<\/p>\n\n\n\n<p>The study also highlights a reallocation of credit exposures across stages, with growth driven by Stage 1 assets (new origination and migrations from other stages). At the same time, coverage ratios declined for Stage&nbsp;1 but increased slightly for Stages&nbsp;2 and 3, reflecting differentiated provisioning dynamics across stages.<\/p>\n\n\n\n<p>The use of post-model adjustments and overlays continued to decline. Overlays represented 9% of total ECL allowances in 2025, down from 10% in 2024 and the lowest level since their introduction during the Covid-19 pandemic. This reflects a greater reliance on model-derived credit risk estimates, although banks continue to factor in macroeconomic, trade-related and climate-related uncertainties.<\/p>\n\n\n\n<p><strong>Leading the study, Partner Vincent Guillard said: <\/strong>\u201c<em>Our study indicates that European banks remain in an overall stable position from a credit risk perspective. Balance sheets reflect a shift towards Stage&nbsp;1 exposures and a continued decrease in reliance on management overlays. While credit costs have slightly increased on average, trends remain diverse across institutions. In this context, persistent macroeconomic uncertainty, including trade tensions, continue to be reflected in forward-looking assumptions and shape cautious forecasting<\/em>\u201d.<\/p>\n\n\n\n<p>Overall, forward-looking macroeconomic assumptions remain diverse across banks. While projections are broadly in line with those of the European Central Bank and the Bank of England, variations remain, and a majority of banks continue to assign significant weight to downside scenarios.<\/p>\n\n\n\n<p><strong>Romanian banks defy earlier expectations of credit deterioration<\/strong><\/p>\n\n\n\n<p>When inflation accelerated to multi-year highs in 2022, interest rates rose sharply, and the war in Ukraine introduced a new layer of geopolitical uncertainty, generating concerns regarding the resilience of borrowers and the potential impact on banks&#8217; asset quality. Against this backdrop, many expected a material increase in credit risk, reflected through higher provisioning levels, increased migration of exposures into Stage 2 and Stage 3, and a deterioration of key IFRS 9 indicators.<\/p>\n\n\n\n<p>Three years later, the evidence suggests that these concerns have not materialised to the extent initially anticipated.<\/p>\n\n\n\n<p>Based on a sample comprising the nine largest Romanian banks, our analysis indicates that the Romanian banking sector remained resilient throughout a period marked by significant economic and geopolitical challenges. While expected credit loss (ECL) balances continued to increase in absolute terms, lending activity expanded at a considerably faster pace, leading to a gradual decline in the ECL-to-exposure ratio across the banking sector. For the sample analysed, the median of the ECL allowance-to-loans gross exposure ratio decreased from 4.6% at year-end 2022 to approximately 3.5% by year-end 2025.<\/p>\n\n\n\n<p>The evolution of IFRS 9 stage allocations provides further evidence of improving credit fundamentals. The share of Stage 2 exposures declined from 17% in 2022 to approximately 13% in 2025, while Stage 1 exposures increased from 79% to 83% over the same period. Notably, Stage 3 exposures remained broadly stable despite a challenging operating environment characterised by elevated inflation, high interest rates, fiscal consolidation measures, slower economic growth and persistent geopolitical uncertainty. Taken together, these trends suggest that borrower resilience proved stronger than expected and that the anticipated broad-based deterioration in credit quality did not occur.<\/p>\n\n\n\n<p>\u201c<em>The focus is now shifting from how Romanian banks absorbed the shocks of recent years to how they navigate the next phase of the economic cycle. Fiscal adjustment and subdued growth could put renewed pressure on borrowers, making disciplined credit risk management increasingly challenging<\/em>\u201d, mentioned <strong>R<\/strong><strong>\u0103zvan Butucaru, Partner, Financial Services &amp; Advisory Leader, Forvis Mazars in Romania<\/strong>.<\/p>\n\n\n\n<p>At the same time, the analysis highlights that credit risk remains concentrated within a relatively small segment of banks&#8217; portfolios. While Stage 3 exposures accounted for less than 4% of total loans throughout the analysed period, their share of total ECL allowances increased from approximately 45% in 2022 to approximately 53% in 2025. This demonstrates that the majority of expected credit losses continue to originate from a limited population of highly impaired exposures, despite the overall strengthening of portfolio quality.<\/p>\n\n\n\n<p>From a provisioning perspective, the period can therefore be characterised as one of gradual normalisation rather than increasing risk. The decline in Stage 2 exposures and related ECL allowances, combined with broadly stable Stage 3 ratios and continued loan growth, suggests that Romanian banks have successfully navigated both the post-pandemic adjustment period and the subsequent inflationary shock. The more cautious credit risk outlook that emerged during the COVID-19 period and was reinforced by macroeconomic uncertainties in 2022 has gradually given way to a more stable risk environment.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"1024\" height=\"682\" src=\"https:\/\/outsourcing-today.ro\/wp-content\/uploads\/2026\/09\/66b405f1-4802-4425-9a29-4d8b7b079e92-1024x682.jpeg\" alt=\"\" class=\"wp-image-16459\"\/><\/figure>\n\n\n\n<p>\u201c<em>As headline credit indicators stabilise, identifying emerging pockets of vulnerability becomes increasingly important. Forward-looking assumptions, scenario calibration and the timely recognition of new risks will remain central to robust IFRS 9 provisioning<\/em>.\u201d, said <strong>Otto Strasszer, Director, Regulatory Reporting, Forvis Mazars in Romania<\/strong>.<\/p>\n\n\n\n<p>Looking ahead, however, the evolution of ECL levels and coverage ratios will remain closely linked to macroeconomic developments. Economic growth prospects, inflation dynamics, interest rate expectations, fiscal developments and geopolitical risks will continue to influence borrower performance and, consequently, provisioning requirements. While current asset quality indicators suggest that Romanian banks enter the next period from a position of relative strength, the sustainability of these trends will continue to depend on the evolution of the macroeconomic environment, including economic growth prospects, inflation dynamics, fiscal adjustment measures and geopolitical developments.<\/p>\n\n\n\n<p>Perhaps the most important conclusion of the analysis is that, contrary to the concerns prevailing in 2022, the Romanian banking sector has so far demonstrated an ability to absorb significant external shocks without a material deterioration in asset quality.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Forvis Mazars Group, the international audit, tax and advisory services partnership, has released the latest edition of its Financial reporting of European banks study based on expected credit losses (ECLs) disclosed in 2025 annual reports by leading European banks. It [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":16458,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[7,19,18,3,17],"tags":[1053],"_links":{"self":[{"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=\/wp\/v2\/posts\/16456"}],"collection":[{"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16456"}],"version-history":[{"count":1,"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=\/wp\/v2\/posts\/16456\/revisions"}],"predecessor-version":[{"id":16460,"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=\/wp\/v2\/posts\/16456\/revisions\/16460"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=\/wp\/v2\/media\/16458"}],"wp:attachment":[{"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16456"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16456"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/outsourcing-today.ro\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16456"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}