Skip to content
, home

#06Credit riskPublished

Before.

Why build provisions when defaults are not rising?

ThenewB drawing #06, “Before”. On the left, stable indicators: 1.8% NPL ratio, stage 2, asset quality. On the right, reasons to anticipate. In the centre, a forward-looking assessment that pushes provisioning overlays up.

In ten seconds

The non-performing loan ratio is stable at 1.8% in the EU/EEA and asset quality is resilient. Yet the EBA, the ECB and the CSSF point to geopolitical tensions, energy prices, supply chains and weaker growth.

Signal

The non-performing loan ratio is stable at 1.8% in the EU/EEA and asset quality is resilient. Yet the EBA, the ECB and the CSSF point to geopolitical tensions, energy prices, supply chains and weaker growth.

Paradox

Provisions can move before defaults do. They follow the scenario, not the observation.

Implication

Provisioning overlays become a judgement to document. The finance function must be able to justify each one, scenario by scenario.

Sources

  • EBA, Risk Assessment Report, June 2026
  • ECB, Financial Stability Review, May 2026
  • CSSF, Financial Sector Report, September 2026

Domains concerned

Related analyses

All perspectives

Ready to think differently?

Talk to us