Claudia Buch, the European Central Bank supervisory chief, stated on Thursday that Euro zone banks are resilient. However, they need to prepare to handle geopolitical shocks and macro-financial threats.
Policy reversals by the U.S. President Donald Trump’s administration have unnerved financial markets in recent months. Policymakers are now assessing how this could affect growth, stability, and financial risk.
The Russia’s war in Ukraine and the Western sanctions that followed has created financial and political stress.
Buch said in a report that “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.”
The ECB’s annual report on supervisory activities said that banks need to be prepared for cybersecurity threats. Banks also need to address identified weaknesses in resilience and risk management.
Buch also urged lawmakers to approve a crisis management and deposit insurance framework. This is to better deal with bank failures and protect depositors.
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