In a keynote speech at the S&P Global Ratings European Financial Institutions Conference, Patrick Montagner, Member of the Supervisory Board of the European Central Bank, assessed European banks as profitable, well capitalized and liquid, with broadly satisfactory asset quality. He cautioned that recent performance could be weakened by changing interest rates, an economic slowdown, higher credit costs and climate and nature-related risks, while geopolitical shocks and growing links with non-bank financial intermediaries could transmit losses through multiple channels. Supervisory attention will remain focused on strict loan origination, prudent collateral valuations, risk-based pricing and capital plans that incorporate severe scenarios and new prudential requirements. Banks also need to address weaknesses in physical climate risk assessment, operational resilience, third-party and cloud dependencies, artificial intelligence governance, cyber defenses, and risk data aggregation and reporting. The ECB will continue using horizontal analyses, targeted reviews and on-site inspections to assess lending practices. Montagner supported removing regulatory redundancies, ambiguities and inconsistencies and simplifying supervisory approaches, but warned against dismantling the core reforms underpinning banks’ resilience. He urged legislators to proceed cautiously and said simplification should remain anchored in robust and consistent regulation.
European Central Bank Banking Supervision urges vigilance on credit, technology and non-bank risks
European Central Bank Supervisory Board member Patrick Montagner said strong capital, liquidity and profitability should not lead banks to underestimate credit, geopolitical, climate, technology and non-bank risks. Supervisory priorities include prudent lending and capital planning, operational and cyber resilience, artificial intelligence governance, and better risk data. He backed targeted simplification but cautioned against weakening the core post-crisis regulatory framework.