ECB alerts banks to new risks

The European Central Bank (ECB) has instructed banks to prepare themselves for emerging risks

The European Central Bank’s (ECB) top supervisor said Eurozone banks must adjust how they manage risk as they face challenges ranging from the end of ultra-low interest rates to the emergence of non-traditional competitors that can quickly steal market share.

Eurozone banks handled the recent surge in inflation and interest rates with remarkable ease and largely escaped last year’s U.S. and Swiss banking turbulence. However, this raises the risk of complacency and fuels calls for lenders to prepare for more difficult times.

Loan losses have remained exceptionally low despite a near-recessionary environment. However, this may be due to unprecedented fiscal and monetary support that shielded banks from shocks, Claudia Buch, the ECB’s top bank supervisor, said on Thursday.

“This has implications for future risk assessments, as past data on loan defaults do not truly reflect the risks to asset quality that lay ahead,” Buch said in the bank’s annual report of supervision.

Source: Reuters

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