Strengthening control over capital adequacy banks from ECB, which by the end of the year may increase the requirements, according to sources cited by Bloomberg. In particular, in a new annual risk assessment for the bloc’s banks, the ECB is likely to focus on liquidity management, potentially raising the bar on key metrics such as the liquidity coverage ratio. In addition, he is expected to call for improved communication between banks and the ECB on this issue.

Her collapse Credit Suisse and US banks in March focused on bank readiness in the event of a massive outflow of deposits, as well as the effectiveness of indicators used to measure their strength. It is worth noting that although liquidity is an important part of banking supervision, in the last year attention has been more focused on the risks associated with higher lending rates.

Preliminary results of the annual assessment are expected to be received by the ECB in the summer. Officials are then expected to categorize banks into different groups based on how exposed they are to deposit outflows. bloomberg.

The focus is likely to be on high net worth deposits, as an outflow of such deposits could put significant pressure on banks’ liquidity. He will also review their funding and how clients rate the safety of their savings.

The Central Bank is considering the possibility of strengthening the quality control of reserves or the ability to manage them as an alternative.

In this context, it is worth noting that the outflow of deposits from wealthy clients is partly responsible for the collapse of Credit Suisse. In fact, just days before the UBS acquisition, the Swiss authorities said the bank had sufficient liquidity.

Of course, European bankers and authorities stressed that the case of Credit Suisse was an exception and that the bloc was not at direct risk of the collapse of the American banking system. Indeed, the European banking sector has not experienced a similar collapse of the chain, especially as banks comply with minimum capital adequacy requirements and pass stress tests. They are also less exposed to interest rate hikes than the US, according to the ECB.

European banks are required to hold liquid assets in excess of the amount that can leak during the 30 days of stress. The ECB has the potential to raise the bar even further. However, in the fourth quarter of 2022, the average capital adequacy ratio was 165%, well above the low of 100%, according to European Banking Authority (EBA).

As an alternative to raising the minimum capital adequacy, the ECB is considering strengthening the quality control or management of reserves. Banks with smaller assets could be notified, increasing pressure to improve their balance sheets or jeopardize their risk management assessments.

Andrea Enria, head of SSM’s supervisory board, said this week that more attention should be paid to bank liquidity and funding. Given monetary tightening, “we identified the need to focus on the sustainability of banks’ funding plans,” he said.