Eurozone banks have sufficient capital buffers to weather shocks and are benefitting from rising interest rates, but “persistent weaknesses” in governance must be addressed, the European Central Bank said Wednesday.
For 2023, the ECB said it would only slightly increase the amount of capital banks need to hold, on average, to 15 percent of risk-weighted assets, compared with last year’s 14.7 percent.
“Banks remain resilient,” the ECB said in a regular review of the around 115 banks it supervises, adding that “the vast majority” held more capital than required.
“Banks have done well in withstanding the economic impact of the Russian invasion of Ukraine, thanks to their strong capital and liquidity positions,” said Andrea Enria, head of the ECB’s supervisory board.
“Despite the outlook worsening throughout the year, rising interest rates led to improved profitability and capital generation,” he added.
But challenges remained, Enria said, warning that “banks need to address persistent weaknesses, particularly in their risk control and governance frameworks”.
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