Banks need to boost scenario planning for rising geopolitical risks, José Manuel Campa, chair of the European Banking Authority (EBA), tells Euromoney.
He pushes back against bankers’ arguments that more aggressive regulation versus the US has put banks in the European Union at a disadvantage.
Neither does he agree with some bankers who argue that EU banks’ strong capital and liquidity, and robust asset quality up to now – despite Covid-19, the war in Ukraine and higher interest rates – means the bloc’s financial authorities do not need to put any more pressure on banks.
The sector is in fine form and well today, but that “doesn’t mean to say you can become complacent and relax”, he adds.
Campa speaks to Euromoney on the sidelines of an Institute of International Finance (IIF) conference in Paris on May 16. “It’s fine because banks, regulators and supervisors have been focused on proactively managing these risks,” he says.
“As we go forward, we see one big macro uncertainty, which is geopolitical uncertainty. Spanning out from that there is more macro-economic uncertainty in the evolution of interest rates and inflation, cyber-attacks, and potential fragmentation of globalization and financial markets.”
Commercial real estate, some areas of leveraged finance and the growth of the non-bank financial intermediation (NBFI) are other areas of regulatory and supervisory attention in Europe, he points out.
But
