European banking sector maintains strong solvency amid record dividend payouts

European banks distributed a record 81 billion euros in dividends for the 2025 fiscal year. According to a report by Morningstar DBRS, the sector maintained strong solvency through the first half of 2026, supported by resilient profitability and active capital management.

The average Common Equity Tier 1 (CET1) ratio remained above 15%, providing a buffer of approximately 450 basis points above minimum regulatory requirements. This capital cushion allows institutions to absorb unexpected losses without immediate recourse to capital increases.

While the sector remains robust, analysts warn that the margin of safety is gradually reducing due to high shareholder distributions, ongoing acquisitions, and evolving regulatory requirements. Despite this, the ability to generate recurring profits and capital continues to support significant shareholder returns.