On Wednesday 18 March, Claudia Buch, Chair of the ECB’s Single Supervision Mechanism (SSM), pointed to “limited pockets of vulnerability” among European banks in market segments such as “commercial real estate and lending to SMEs”.
However, the major banks in the euro area have “solid levels of capitalisation”, with a CET1 ratio of “around 16%”, Ms Buch told the European Parliament’s Committee on Economic and Monetary Affairs. She noted that there were “no significant signs of deterioration in asset quality”, with the proportion of non-performing loans remaining “relatively stable at around 2%”.
According to her, “banks need to monitor exposures to sectors and firms that are particularly vulnerable to heightened risks”. “This is crucially important in the current geopolitical context, where the ongoing conflict in the Middle East adds layers of uncertainty [...] has market impact, and could impair credit quality”, she stressed, pointing out that the current geopolitical context could subsequently have negative “impact” on bank balance sheets.
The SSM Chair cited the following priorities for the work of banking supervision: ensuring that banks remain robust in the face of heightened geopolitical uncertainty and in carrying out their day-to-day business as they face increasingly acute competition from financial and payment service providers outside the banking system.
Ms Buch also stressed the importance of fully implementing the ‘Basel III’ international prudential standards in the European Union in order to ensure a level playing field at international level and to strengthen financial stability. (Original version in French by Mathieu Bion)