Almost a year after the start of the Russian war of aggression against Ukraine, the ECB’s banking supervisory authority has confirmed that the financial institutions in the euro zone are in a stable situation. Banks have weathered the impact well, thanks in part to their strong equity and liquidity positions and higher profitability, European Central Bank Banking Supervisor Andrea Enria said on Wednesday. The ECB is keeping the capital requirements for institutions for 2023 roughly constant overall. For the duration of the war, however, Enria expects further challenges.
The chief supervisor warned that the banks would have to eliminate weaknesses, especially in their risk control and corporate governance. They would also have to carefully assess future developments. Some banks in the euro zone had to take large write-downs as a result of the war and the sanctions against and by Russia. From the ECB’s point of view, the institutes should also carefully monitor the effects of rising interest rates.
The banking supervisory authority regularly assesses the sustainability of the business model and the risk management of banks. As a result, the authorities set individual capital surcharges for banks.