Large banks in the eurozone are well positioned to deal with crises, with robust capital and liquidity reserves, the European Central Bank (ECB) has assessed.
In the annual stability check of the banking sector, the ECB stated that banks are profitable, even though they are operating in unfavorable circumstances, including geopolitical risks, new patterns of competition due to digitization and competition from virtual banks.
“All this dictates timely risk assessment and sufficient resilience,” the ECB said.
The ECB regularly checks the sustainability of the business model and risk management of large banks, as part of the Supervisory Review and Evaluation Process (SREP), reports SEEBiz.
The SREP, among other things, determines the capitalization of individual banks and limits the amount of dividends paid to shareholders.
Supervision of the banking sector is one of the lessons of the global financial crisis in 2008. The ECB directly checks the condition of 105 large banks in the eurozone.
