Some European banks, despite signs of a deterioration in the quality of their loans, “have already begun to loosen their hedges and others intend to do so”: this has helped generate profits in the first half of 2021, “however it requires us to make sure banks remain vigilant and have robust control mechanisms to proactively address these risks. “
Andrea Enria, president of the Banking Supervisory Board, and Mario Quagliariello, director of the Supervisory Strategy and Risk Division, write this in a blog on the ECB website.
In the article, Enria and Quagliariello highlight that “several indicators point to a potential deterioration in the quality of assets in the future”, such as Stage 2 loan flows, at double levels compared to before the pandemic, the trend of loans subject to measures of forbearance and the possibility that the loans subject to moratorium subsequently turn into non-performing.
With rates at historic lows, liquidity and unprecedented public support measures adopted during the pandemic – the ECB blog also reads – many banks have adopted a “complacent attitude” of greater exposure to risks in search of higher returns, leading to valuations that may be subject to correction.
“We will increase our vigilance with respect to the risks posed by an excessive search for yields”, say Enria and Quagliariello. (HANDLE).
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Source From: Ansa
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