Less dilution of equity capital certificates issued at a discount to book value would support savings banks’ credit profiles, but maintaining the cap on ECC holder representation on supervisory boards could have negative implications.

Corporate NPL ratios remain high, particularly in Germany, France, Austria and Belgium, while geopolitical risks and trade tensions have rendered the economic outlook uncertain. Our baseline of a moderate deterioration in asset quality remains intact.

Following MPS’s acquisition of Mediobanca and BPER’s takeover of BPSO, we expect Banco BPM to play a more active role in Italy’s banking consolidation wave, which is being driven by financial as well as strategic and political factors.

Scope Ratings has published an update to its Financial Institutions Rating Methodology. No outstanding ratings are impacted.

Housing, the main collateral for covered bonds, contributes more than a third of Europe’s GHG emissions. Yet while climate change can significantly amplify credit risk in covered bonds, mitigation can add more credit risk than actual climate impacts.

French banks are well positioned to navigate short-term market volatility, but a prolonged political crisis could weigh on the sector via lower growth in lending and higher funding costs, partially reversing recent improvements in profitability.

UK banks’ credit fundamentals are strong. While we do expect some asset-quality weakening, profitability will remain high in 2025, capital is robust, liquidity is stable and deposits are growing. Meanwhile, sector consolidation will continue.

We continue to expect a mild deterioration in asset quality as pressure in some corporate sectors intensifies amid heightened geopolitical risk and a potential slowdown in global trade.

The UK Supreme Court judgment partially reversing the Court of Appeal ruling on car finance provides widespread relief to the banks affected as it will materially reduce compensation payouts. The FCA redress scheme will further moderate credit pressures.

Stress-test results demonstrate the improvements Italian banks have made in recent years. Capital positions are comfortable, asset quality is robust and profitability is resilient. Record first-half results point to another strong year.