Coverage: Q3 2026 · Information to 13 October 2026
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TGB Quarterly Regional Banking Monitor · 13 October 2026
Europe's central banks diverged in September 2026, with the ECB and Norges Bank raising rates while the Bank of England, the Riksbank, the SNB and the CNB held, and large banks reported second-quarter results as takeover contests unfolded in Italy and Germany.
The desk view
European banks entered the autumn with solid capital and rising policy rates. The ECB raised its three key rates by 25 basis points on 10 September 2026, and euro area inflation reached 3.8% in the September flash estimate. Significant institutions reported a return on equity of 10.73% and a CET1 ratio of 16.00% for the second quarter of 2026. Non-performing loan ratios were broadly stable at 2.17%. The Bank of England held Bank Rate at 3.75% by a 6-3 vote, with three members preferring 4%. Among the banks reviewed here, second-quarter CET1 ratios ranged from 13.0% at BNP Paribas to 15.7% at Nordea. Bank takeover activity remains in progress: UniCredit's offer for Commerzbank still awaited merger control, EU foreign subsidies and most financial regulatory clearances on 8 September 2026, MPS launched an offer for Banco BPM, and Intesa Sanpaolo raised the cash component of its offer for MPS to 1.25 euro per share on 3 October 2026. This suggests that capital and asset quality were stable going into the rate rise, while the exposures to watch are rising inflation and the execution of large bank transactions.
Policy tightening and the inflation backdrop
The ECB raised its deposit facility, main refinancing and marginal lending rates to 2.50%, 2.65% and 2.90% from 16 September 2026. The Governing Council took the decision on 10 September 2026, raising all three key rates by 25 basis points. On 23 July 2026 it had left the same three rates unchanged at 2.25%, 2.40% and 2.65%.
The ECB said that the conflict in the Middle East continues to generate inflation pressures and that inflation is set to remain well above target for an extended period. It also said the Governing Council is not pre-committing to a particular rate path. The account of the meeting records that the Chief Economist proposed a 25 basis point increase in the three key rates. It also records the argument that, with no financial stress and with solid household, corporate and bank balance sheets, a hike should be transmitted through the financial system in an orderly manner. This suggests that policymakers viewed the health of bank balance sheets as a condition that allowed them to tighten rather than as a constraint on doing so.
Eurostat's flash estimate put euro area annual inflation at 3.8% in September 2026, up from 3.2% in August. In August the rate had been 3.2%, up from 2.9% in July. Energy inflation was estimated at 18.8% in September, against 14.3% in August.
The ECB's September staff projections put headline inflation at 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. The 2026 figure is unchanged from the June projections, while 2027 and 2028 have been revised up. Inflation excluding energy and food is projected at 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028. Staff expect growth of 0.9% in 2026, 1.4% in 2027 and 1.5% in 2028. The 2026 and 2027 growth figures are upward revisions, mainly reflecting the greater than expected resilience of the euro area economy.
Euro area GDP rose 0.6% in the second quarter of 2026 after remaining stable in the first quarter. It was 1.2% higher than a year earlier. Outside the euro area, the first ONS estimate put UK GDP growth at 0.4% in the second quarter, after 0.6% in the first. The ONS quarterly national accounts of 30 September 2026 revised the second-quarter figure up to 0.5%, with the first quarter unrevised. Swedish GDP rose 1.6% in the second quarter, seasonally adjusted and compared with the previous quarter.
The ECB raised rates on 10 September and Norges Bank on 24 September. The Bank of England held on 16 September, the CNB on 17 September, and the Riksbank and the SNB on 24 September.