ECB Is Pushing Banks to Scrutinize Their Energy-Intensive Risks - BLOOMBERG
(Bloomberg) -- The European Central Bank is pushing lenders to scrutinize their exposure to energy-intensive industries as the fallout from Russia’s invasion of Ukraine spreads through the economy.
The ECB is also calling on lenders to look at risks they could face from rising interest rates, although banks expect to benefit from tighter monetary policy overall, said Andrea Enria, who leads the ECB’s supervisory board. He spoke at a conference in Brussels.
The ECB wrote recently to lenders, telling them to analyze the impact of a gas stoppage on their businesses, people familiar with the matter said recently. Responses are due in mid-September and follow-up conversations are to come by the end of this month, the people said.
Enria reiterated his call for banks to factor in a potential “severe” economic downturn in their projections of how capital ratios will evolve. Those calculations are a key factor banks take into account when announcing dividends and share buybacks.
While banks are starting from a position of strength thanks to high capital levels, Enria also said the models lenders use to forecast the future can sometimes paint an overly benign picture.