European Central Bank Vice President Luis de Guindos told finance ministers on Tuesday that some European Union banks could be vulnerable to financial strain due to rising interest rates.
(Bloomberg) — European Central Bank Vice President Luis de Guindos told finance ministers on Tuesday that some European Union banks could be vulnerable to financial strain due to rising interest rates.
Elaborating on the state of the financial industry after the collapse of Silicon Valley Bank, Guindos told the regular Ecofin meeting in Brussels that lenders in the region are much less exposed than their US counterparts, according to people familiar with the talks, who declined to be identified discussing private conversations.
All the same, Guindos said that the ECB couldn’t rule out that some lenders might be at risk because of their business models, according to the people. He cautioned not to be complacent and warned that a lack of confidence could trigger contagion.
An ECB spokesman declined to comment on the meeting.
The discussion took place before a collapse in Credit Suisse Group AG’s share price prompted Switzerland’s central bank to offer it liquidity.
Guindos highlighted the potential conflict between the ECB’s mission to bring down inflation and potential damage to some financial institutions from higher interest rates.
More generally, banks in the EU are cushioned by high-quality liquidity buffers and increasing borrowing costs are supporting their margins, he told the EU ministers, the people said.
Two days after Guindos’s briefing to ministers, the ECB on Thursday raised rates by a half point, but refrained from giving any guidance on future moves.
In its statement, the Governing Council declared that “the euro-area banking sector is resilient, with strong capital and liquidity positions.”
Officials are ready to provide “support to the euro-area financial system if needed,” the ECB said.
–With assistance from Jorge Valero, Jana Randow, Andrew Langley and James Hirai.
(Updates with ECB decision in final two paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.