ECB tells banks to prepare for new types of risk

0
1798

 ​[[{“value”:”ECB tells banks to prepare for new types of risk By Reuters

Breaking News

‘;

Economy

Published Mar 21, 2024 02:03AM ET

© Reuters. FILE PHOTO: A view of the European Central Bank (ECB) headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File Photo

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

Euro zone 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, raising the risk of complacency and fuelling calls for lenders to prepare for more difficult times.

Loan losses have remained exceptionally low, despite a near recessionary environment, but this may be down 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.

Lenders also need to better prepare for risk related to cyber attacks, climate change and geopolitical shifts, which could all fundamentally alter their long-term business models.

“It is therefore crucial that banks adjust their risk management practices to the new environment,” Buch said.

Innovation, such as the wider use of distributed ledger technology and artificial intelligence, lowers the bar for competitors, including so-called shadow banks, to enter the market, potentially pushing down margins and forcing banks to take on undue risk.

“Innovation and increased competition may improve economic welfare, but they also create new risks,” Buch said. “If banks see their margins being squeezed, they may turn to potentially riskier activities.”

ECB tells banks to prepare for new types of risk

Our Apps



Terms And Conditions
Privacy Policy
Risk Warning
Do not sell my personal information

© 2007-2024 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

“}]] 

Post Disclaimer

The information provided in our posts or blogs are for educational and informative purposes only. We do not guarantee the accuracy, completeness or suitability of the information. We do not provide financial or investment advice. Readers should always seek professional advice before making any financial or investment decisions based on the information provided in our content. We will not be held responsible for any losses, damages or consequences that may arise from relying on the information provided in our content.