Europe’s top bank watchdog is sounding the alarm!
Claudia Buch (57) is chairwoman of the European Central Bank’s banking supervisory board: She keeps an eye on the banks in the euro zone. Buch is now urging financial institutions to be more vigilant. Because: The success of the business model is in danger, says Buch – and with it the entire economy!
“Structural change in the real economy, emerging risks, digitalization and increased competition can call banks’ business models into question,” said Buch in a speech in Brussels.
▶︎ This means: war, climate change, cyber attacks, the aging society can endanger the banks’ business. Banks are “not immune to these risks and unexpected events,” Buch said. Company bankruptcies could increase and loans could no longer be repaid.
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Trigger: More and more bad loans are coming onto the market, warns Buch. There are “already clear signs that the asset quality of major institutions is beginning to deteriorate.”
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▶︎ This means: More and more borrowers can no longer pay their repayments and interest payments. This is extremely dangerous for the economy! Because bad loans cause costs for banks because they have to set aside money to cover expected losses.
Banks then have less left over to grant further loans, and the economy suffers as a result. Since 2023, these loans at risk of default have increased slightly again, although still at a low level, said chief supervisor Buch.
Now the banks have to act. Many challenges are “structural rather than temporary and require adjustments.” The financial institutions are “more resilient than at the beginning of the banking union ten years ago”. However, there is no reason for complacency.
The banks would have to take much more precautions NOW by creating money buffers.
2024-02-12 22:21:59
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