The ECB zeroes in on troubled loans, a byproduct of the slowdown. Their targeted efforts aim to curb the fallout. Zeroing in on recovery, the ECB targets measures to secure financial stability. In a time of economic slowdown, such targeted action is crucial for navigating troubled waters.
FRANKFURT (Reuters) – The European Central Bank (ECB) supervisors are set to focus on bad loans this year after identifying that some eurozone banks had insufficiently provisioned for them or were slow to acknowledge the problem. The annual review of the sector conducted by the ECB revealed that euro zone banks generally held more capital than required. Despite a profit boost from rising interest rates offsetting the economic impact of the Ukraine conflict, the ECB warned that this situation might not be sustainable.
The ECB has already called for increased capital from 24 banks that fell short of expectations concerning non-performing loans, urging them to address this issue during the year. It also identified ongoing deficiencies in risk control, particularly related to how banks classify loans at risk of non-payment.
ECB’s Andrea Enria emphasized the need for better governance in banks, highlighting a lack of IT experience and independence among some board members. It maintained its capital requirement, known as Pillar 2, at 1.1% of risky assets for banks, unchanged from the previous year, with only one bank falling below this requirement.