Resilience of European banks is good, but financial stability risks are elevated amid geopolitical uncertainty – European Systemic Risk Board’s latest assessment

At its meeting on 21 March 2024, the General Board of the European Systemic Risk Board (ESRB) acknowledged the resilience of Europe’s banking system but concluded that risks to EU financial stability remained elevated amid high geopolitical uncertainty.

“The effects of the escalation in geopolitical confrontation must be taken into account in the financial system as well. We have entered – on an evidently permanent basis – a more volatile time where risks can emerge which could spark even severe disruptions in the financial system. It’s therefore essential to maintain and further strengthen the financial system’s resilience in Europe, ensuring that the capacity of banks to lend to businesses and households remains solid,” says Governor of the Bank of Finland Olli Rehn, who also serves as First Vice-Chair on the General Board of the ESRB.

The General Board noted, in regard to the macroprudential policy stance, that countries are taking appropriate measures to enhance banking sector resilience. The General Board welcomed that 27 European Economic Area (EEA) countries have built up, or are building up, capital buffers in the form of a countercyclical capital buffer and/or systemic risk buffer.

The General Board also exchanged views on other current themes that are important for financial stability, such as the impact of interest rates and inflation on financial stability, the risks related to non-bank financial intermediation, and systemic cyber threats and operational risks.

The European Systemic Risk Board’s press release published today has more details of the meeting.