FRANKFURT (Reuters) – Euro zone banks are resilient but need to be prepared to handle geopolitical shocks and macro-financial threats, European Central Bank supervisory chief Claudia Buch said on Thursday.
Policy reversals in some key areas by U.S. President Donald Trump’s administration has been unnerving financial markets in recent months, and policymakers are now assessing how this could affect growth, stability and financial risk.
This comes on top of financial and political stress created by Russia’s war in Ukraine and the Western sanctions that followed.
“A potential deterioration in asset quality and possible economic disruptions caused by geopolitical conflicts or the effects of financial sanctions require heightened attention, sufficient capital and robust governance and risk management systems in banks,” Buch said in a report.
Banks need to be prepared for cybersecurity threats and also need to address identified weaknesses in resilience and risk management, Buch said in the ECB’s annual report on supervisory activities.
Buch also called on lawmakers to make progress in approving a crisis management and deposit insurance framework to better deal with bank failures and protect depositors.
(Reporting by Balazs Koranyi; Editing by Jan Harvey)
