US EditionECB Warns Banks to Prepare for Unprecedented Global Shocks
The European Central Bank plans reverse stress tests and calls for stronger liquidity and tighter credit to guard against rising global risks, including trade and geopolitical tensions, it said.
- This year, the European Central Bank warned euro zone banks must prepare for unprecedented shocks that could severely disrupt financial systems.
- The ECB says banks face a new reality of more frequent shocks ranging from tariffs to cyberattacks, while financial markets are prone to sudden corrections and asset prices may not reflect political risk.
- The ECB will keep overall capital requirements stable this year while easing a non-binding Pillar 2 guidance and running reverse stress tests requiring banks to map capital-depletion scenarios.
- For now, banks are resilient with strong profitability and stable asset quality, the ECB said, but it expects euro zone banks to hold healthy capital buffers and update technology.
- Significant downside risks persist from US-EU trade tensions and geopolitical factors hitting export-oriented sectors, so the ECB will prioritise prudent risk-taking and sound credit underwriting standards.
34 Articles
34 Articles
The ECB makes warnings that tensions between the EU and the US could affect the banks' financial system, including with consequences for Germany.
European Banks Face Unprecedentedly High Shock Risk: ECB
Banks in the Eurozone need to prepare for unprecedented shocks as “global uncertainties have surged to exceptional levels,” the European Central Bank (ECB) said on Nov. 18. Outlining its supervisory priorities for the next three years, the ECB warned the current climate could result in serious disruptions with far-reaching consequences for the continent’s financial systems. The ECB, which formulates monetary policy for the European Union and set…
One lesson of the financial crisis was the supervision of banks by the ECB. The central bank now raises its finger. Although the money houses are currently well there, extreme events have become more likely in the face of international tensions.
The bank overseers warn with forceful words.
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