LONDON, Dec 9 (Reuters) – Some banks within the euro zone may battle to pay again cash borrowed from the European Central Financial institution as risky markets make it tougher to lift funds, the European Union’s banking watchdog stated on Friday.
Banks had till lately been sitting on 2.1 trillion euros ($2.21 trillion) value of money from the ECB’s Focused Longer-Time period Refinancing Operations (TLTRO), however are actually repaying them after the central financial institution raised the borrowing prices on them.
“Banks should repay substantial quantities of central financial institution loans till 2024. Plenty of banks will be capable to depend on current liquidity buffers – together with central financial institution deposits – to pay again central financial institution loans,” the European Banking Authority stated in a report on banking dangers within the 12 months to June 2022.
“Some banks nonetheless could must problem further debt or enhance deposits. It stays to be seen how pricey changing central financial institution funding might be,” EBA stated.
Assembly separate minimal necessities for issuing debt that may be written down in a disaster may additionally show a problem for some banks, EBA stated.
New inflows of “non-performing” or souring loans elevated considerably within the first half of 2022 because the economic system started to deteriorate and customers had been hit by a value of residing disaster, prompting banks to extend provisions.
Banks proceed to carry capital nicely above regulatory necessities, the watchdog stated.
The typical return on fairness, a key measure of profitability, stays under the estimated price of fairness, with finest performers from Greece, Romania and Slovenia, and laggards from Hungary and Eire.
“Within the medium time period, market contributors don’t count on main profitability enhancements,” EBA stated.
($1 = 0.9493 euros)
Reporting by Huw Jones; Enhancing by Toby Chopra
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