In an interview with Les Echos, European Central Bank Supervisory Board member Patrick Montagner said euro area banks remain robust despite rising interest rates, geopolitical risks, energy price uncertainty and imbalances in private asset markets. Higher rates could increase funding costs, squeeze margins and reduce lending volumes, while lowering the value of banks’ sovereign bond holdings. However, the ECB does not currently assess widening spreads as increasing risks for supervised banks, and the sector enters this period with stronger, higher-quality capital and better shock absorption capacity than during the 2008 financial crisis or the 2012 sovereign debt crisis. Montagner also reiterated the ECB’s support for streamlining overlapping and potentially inconsistent regulatory requirements, while emphasizing that simplification should preserve the Single Rulebook, bank resilience and the Basel framework. Any relaxation of capital requirements should be approached cautiously, and the output floor should retain its role even if its calibration is reassessed. He added that artificial intelligence could reshape economic activity, lending, market operations and risk hedging, adding another potential source of stress that supervisors must monitor alongside existing uncertainties.
European Central Bank supervisor Patrick Montagner backs simpler bank rules while cautioning against capital relief
European Central Bank Supervisory Board member Patrick Montagner said euro area banks remain resilient despite rising rates and wider economic risks, with stronger capital than during the 2008 and 2012 crises. He backed simpler and more coherent bank rules but cautioned against capital relief and called for the Basel output floor’s role to be preserved.