DPresident of the European Central Bank (ECB), Christina Lagarde, And did not praise the ECB’s banking supervision and work too much. She used Tuesday’s opening speech at the European Central Bank’s Banking Regulatory Conference to urge banks to be more cautious in dealing with credit risks. Because for Lagarde, it is too early to make a conclusion. The full impact of the pandemic will only become apparent gradually and may challenge credit risk management.
Government relief measures and regulatory relief may obscure the debtor’s potential creditworthiness. If these measures expire and disclose the company’s actual financial status, this may affect credit quality. Lagarde mentioned leading indicators such as deferred loans, which have shown that the situation is deteriorating. The final impact on non-performing loans will be determined after several years of delay, depending on the vitality of the economic recovery.
“We are very vigilant,” said Anna Botín, chairman of the board of directors of major Spanish banks SantanderAccording to her, the focus is mainly on sectors that are particularly severely affected by the pandemic. This includes tourism, which is very important for Spain, and the blockade particularly restricts tourism. At the same time, Boting emphasized that not all sectors of the economy have been affected by the pandemic.
“Marginal effects prevail”
Andrea Enria, head of banking supervision at the European Central Bank, talked about the extremely low interest rate environment.Extremely deep Interest expense At the same time, it will bring more burdens to European banks, rather than benefits to them. According to Italians, this negative impact on spreads may continue for some time. “Indeed, the profit rate effect has been widespread recently,” Enlia said. He pointed out that the bank successfully offset the negative interest rate effect through transaction income and higher commission income. Despite the diversification of income sources, banks must still solve the burden of extremely low interest rates from the perspective of cost structure and business model.
Enlia once again expressed how necessary he thinks the completion of the European Banking Union is. In his previous speech, Lagarde also pointed out the importance of common rules to avoid regulatory arbitrage. Enria clearly mentioned the European Union Deposit Insurance Scheme, which can also facilitate the cross-border flow of capital and liquidity between the parent company and subsidiary of a bank group.
So far, United Deposit Insurance has encountered resistance in Germany because it requires reducing the number of loans that are at risk of default on bank balance sheets. This is to avoid the commonality of risks.Lagarde mentioned the success of European banking supervision, for which EZB Responsible. Since then, the return on equity has increased significantly, and problematic loans on the balance sheet have decreased by approximately 50%. Her predecessor, Mario Draghi, is the head of the Italian government. Italian banks are still burdened with non-performing loans. He has advocated the European Union Deposit Insurance Scheme.
Enria praised European banks for using the pandemic to solve deeper problems that weaken their profitability compared to US competitors. Your profitability has developed very well recently, and he is very satisfied.
