"European banks, be ready for major shocks" - ECB warns of the risk of potential crises in the coming years
The European Central Bank (ECB) said on Wednesday that eurozone banks should prepare for unpredictable shocks that could have far-reaching consequences for financial systems. The statement came as the institution outlined its supervisory priorities for the next three years.
The ECB has long argued that banks are facing a new reality, with more frequent shocks, from trade tariffs to cyberattacks, requiring preparation for a wide range of scenarios, without knowing the exact nature of the next crisis.
This requires strong capital reserves, up-to-date technological infrastructure, proactive management in step with financial developments and, in some cases, more intrusive supervision.
“Geopolitical tensions and changes in trade policies, climate and nature-related crises, demographic changes and technological shocks are deepening structural vulnerabilities, unprecedentedly increasing the probability of extreme, albeit rare, events,” the ECB said in a statement.
For this reason, strengthening banks' resilience to political risks and uncertainties will remain the main supervisory priority, the institution emphasized.
Given the unpredictable nature of these risks, the ECB plans to conduct a stress test, in which it will determine the levels of capital consumption and ask each bank to design scenarios that could trigger such a situation.
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