MNI BRIEF: Eurozone Banks Well Positioned For Higher Rates-ECB

Most eurozone banks are well positioned for higher rates, and any negative impact from increased provisions on the capital adequacy ratios of significant institutions from a 300bps upwards rate shock should be fairly muted, the European Central Bank said in a report of supervisory activities.

With the report compiled before the turmoil of recent weeks, the 2022 review of interest rate and credit spread risk showed an upward 200 bps rate shock would, for most banks, have a positive impact on profitability -- even if the economy slowed at the pace seen in pre-March ECB projections.

In a foreword written before Feb 28, ECB President Christine Lagarde said rising rates in the euro area had helped boost profitability and improve asset quality. However, she said European banking regulators were monitoring the build-up of risks as funding conditions tighten, adding that banks must tackle governance and risk control framework risks.