Banking supervision
ECB supervision warns financial institutions to be more vigilant
The banks in the euro area did well overall in 2024. But the supervisory authority is warning the institutions to rest on their recently increased profits. Because there are plenty of risks.
The ECB banking supervisory authority is calling on financial institutions to be cautious despite their overall solid crisis buffers and recently bubbling profits. “Looking ahead, the weakening macroeconomic outlook and structural changes in the economy require increased vigilance,” warn the banking supervisors of the European Central Bank (ECB).
Geopolitical risks are often only priced into the financial markets when they materialize. This could then lead to risks having to be abruptly reassessed and additional losses occurring.
According to the supervisory authority, the banking sector in the euro area appeared resilient in the year that ended: “On average, banks maintained solid capital and liquidity positions that were well above regulatory requirements.”
Capital requirements remain largely constant
The ECB Banking Supervision regularly assesses the viability of the business model and the risk management of banks (“Supervisory Review and Evaluation Process”/SREP). As a result, the supervisors set capital surcharges for certain banks and, among other things, determine how much money institutions can pay out to their shareholders as dividends.
Based on the latest study, the total capital requirements and the guidelines applicable for 2025 increase slightly to 15.6 percent, compared to 15.5 percent in 2024. The ECB banking supervision currently directly monitors 113 financial institutions in the euro area, which together account for 82 percent of the banking market in the currency area.
dpa
Source: Stern
