The common equity Tier 1 ratios of banks in Spain and Italy improved in the second quarter from the previous three months but remained below the average for European banks, according to the European Banking Authority's latest transparency exercise.

In June, after the coronavirus crisis had taken hold, Spanish banks had the lowest average CET1 ratio among European banking systems in the sample — 11.78%, up from 11.52% in March. Italian banks improved their average ratio quarter over quarter to 13.87% from 13.41%. These, however, remained below the average aggregate of 14.71% for European banks in the period. Also sitting below average were banks in Germany, Romania, Austria, Bulgaria, Portugal, Estonia, Hungary and Greece.

Banks in Iceland remained the most well-capitalized among lenders in the sample, with an average ratio of 21.54% in June, compared to 21.46% in March, followed by their counterparts in Luxembourg, Malta and Belgium. Danish banks also made it to the top 5 of the list despite a decline in their CET1 ratio to 17.95% in June from 18.17% in March.

In terms of leverage ratios, banks in Sweden had the lowest average of 4.17% in June, unchanged from March and below the average aggregate of 5.16% for European banking systems in the sample. The leverage ratios of banks in the Netherlands, Denmark, Germany and France were also below the average aggregate.

Icelandic banks also topped the list of leverage ratios with 14.40% in June, compared to 14.27% in March, followed by Bulgaria, Lithuania, Slovenia and Poland.

The leverage ratio measures Tier 1 capital as a share of total leverage, including on- and off-balance-sheet exposures, while the common equity Tier 1 ratio measures CET1 capital — the highest-quality capital — as a share of assets weighted for riskiness.

Click here to access the Market Intelligence EBA transparency exercise template.