(Tiper Stock Exchange) – The Eurozone banking sector remains resilient, both from a capital strength perspective and from a liquidity perspective. This is what the president of the supervisory branch of the ECB reiterated, Andrea Enrico in the documentation prepared in view of the debate with the finance ministers of the Eurogroup scheduled for today.
In particular, Enria points out that the capital strength ratio (Cet1) din the major European banking institutions stands at an average of 15.3% at the end of 2022, while the liquidity coverage ratio reaches 161%, or “well above the levels of regulatory requirements and previous levels” to the economic damage of the restrictions imposed due to Covid. Meanwhile, the indicators on the quality of the loans disbursed continue to improve with the rate of non-performing loans (non-performing loans, or NPLs) at 1.8% at the end of 2022, compared to 2.1% recorded at the end of 2021. The head of EU banking supervision therefore returned to reassure after the tensions that have been seen on world markets following the bankruptcies of the Silicon Valley Bank and some other banks in the USA. Furthermore, he underlined that the direct exposure of European banks to Russia further decreased by 25% between the third and fourth quarters of 2022 and that at the end of 2022 it was 37% lower than at the end of 2022.
As for the maneuver to raise interest rates that the monetary branch of the ECB is operating “has ensured a strengthening of the profitability of the banks“, but looking forward this same “normalization dynamic also increases banks’ exposure to interest rate risks on their balance sheets and could have adverse effects on asset quality (such as loans) and lead to risk of counterparty credit losses”. notes Enria