Since the publication of the EBA’s last risk assessment report (Report on Risks and Vulnerabilities of the European Banking System, July 2012) the EU banking sector has seen some improvement in market confidence – from both debt and equity investors. Nevertheless, these signals may prove temporary and the macroeconomic environment for most European banks remains fragile, especially for banking systems in countries where the sovereign itself is financially-stressed. Thus, serious challenges remain due to increasing credit risk and low profitability levels that could be further depressed by rising loan-loss provisions.[...]