The end of the year is getting harder for European banks

A complicated end to the year ahead for eurozone banks. Many institutions have already warned that they are moving towards a “normalisation” of their cost of risk (loss incurred when a loan is not repaid). But the difficulties ahead are broader, and linked to the economic consequences of the war in Ukraine.

“We are asking banks to revise their capital forecasts in dark, adverse scenarios, and we will start a dialogue with them,” Andrea Enria, the head of banking supervision in the eurozone, said last week at a conference in Brussels. “We encourage banks to really focus on concentrating exposures to sectors that are particularly dependent on energy and vulnerable to energy shocks,” he added.

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