Eurozone banks ‘resilient’ however dangers stay: ECB

FRANKFURT: Eurozone banks have ample capital buffers to climate shocks and are benefitting from rising rates of interest, however “persistent weaknesses” in governance should be addressed, the European Central Financial institution stated Wednesday.

For 2023, the ECB stated it will solely barely enhance the quantity of capital banks want to carry, on common, to fifteen p.c of risk-weighted belongings, in contrast with final 12 months’s 14.7 p.c.

“Banks stay resilient,” the ECB stated in an everyday overview of the round 115 banks it supervises, including that “the overwhelming majority” held extra capital than required.

“Banks have carried out effectively in withstanding the financial affect of the Russian invasion of Ukraine, due to their robust capital and liquidity positions,” stated Andrea Enria, head of the ECB’s supervisory board.

“Regardless of the outlook worsening all year long, rising rates of interest led to improved profitability and capital technology,” he added.

However challenges remained, Enria stated, warning that “banks want to deal with persistent weaknesses, notably of their threat management and governance frameworks”.

The ECB’s report highlighted concern concerning the effectiveness and make-up of administration our bodies, in addition to banks’ experience in assessing and managing climate-related dangers and cyber threats.

If such points should not resolved, there can be a supervisory “escalation course of”, Enria informed a Frankfurt press convention.

Some eurozone lenders have previously accused the ECB’s supervisory arm of being too intrusive, however Enria dismissed the criticism.

“The banks perceive what we wish from them, however typically they aren’t reacting as quick and decisively as we’d count on,” he stated.