FRANKFURT – The European Central Financial institution has informed banks to buckle up and put together for a bumpy highway forward because the Ukraine conflict hits the financial system and a sudden surge in rates of interest makes markets extra risky, the ECB high supervisor Andrea Enria mentioned on Wednesday.
Euro zone banks had been simply popping out of emergency measures imposed on the top of the coronavirus pandemic, together with a cap on dividend payouts, when the battle broke out in February and the financial outlook darkened once more.
Enria mentioned supervisors had now informed banks to “reassess” their expectations, together with on how a lot capital they are going to have at their disposal.
“Now we have requested banks to reassess their projections and capital trajectories within the mild of the brand new macroeconomic image, additionally contemplating hostile eventualities,” Enria informed Italian every day Repubblica.
In slides ready for a gathering with the Italian banking foyer, Enria mentioned larger power and commodity costs had been driving up inflation and slowing development, overshadowing a lift to financial institution margins from rising rates of interest.
On the upside, he mentioned banks had proven resilience in 2021 and continued to wash up their stability sheet, regardless of a rise in company defaults within the final three months of the yr when COVID-19 help measures had been retired.
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