MNI BRIEF: Bank Balance Sheets Solid, But Risks Remain - SREP

Banks will be required to hold larger capital reserves going forward, ECB banking supervisors said Thursday, with most Euro area banks already operating at capital levels above those required. Capital requirements and guidance are increased from 14.9% in 2021 to 15.1% of risk-weighted assets in 2022. Capital requirements and guidance in CET1 increase from 10.5% in 2021 to 10.6% of risk-weighted assets in 2022.

Overall scores reported as part of the Supervisory Review and Evaluation Process (SREP) remained broadly stable, with banks maintaining solid capital and liquidity requirements. But uncertainties related to the future trajectory and evolution of the pandemic, high levels of non-performing loans in some areas, supply chain disruption, cyberattacks, climate-related risks, pressure on profitability, and exiting the low interest rate environment remain, supervisors said. Credit risk and internal governance are also key areas in terms of supervisory action.