FRANKFURT, June 13 (Reuters) – Euro zone banks are sitting on comparatively modest quantities of unrealised losses associated to sharply greater rates of interest, the European Central Financial institution’s prime supervisor mentioned on Tuesday, unveiling the outcomes of a particular data request from lenders.
A mountain of unrealised losses led partially to the collapse of Silicon Valley Financial institution in the US earlier this yr and lots of U.S. regional lenders additionally failed to regulate the worth of their holdings to replicate charge hikes.
“For all of the banks beneath the supervision of the ECB, the general quantity of unrealised losses is fairly contained,” Andrea Enria mentioned. “It’s within the ballpark of 70 billion (euros).”
“In case you examine with what U.S. authorities have disclosed just lately … that was north of 620 billion,” Enria mentioned.
The ECB has raised charges by a mixed 375 foundation factors over the previous yr and additional hikes are nonetheless doubtless as policymakers hope to arrest runaway inflation.
Whereas this can elevate margins for banks, it can decrease the worth of some authorities bond holdings and will additionally cut back some debtors’ skill to service their debt.
Enria additionally mentioned that this yr’s stress check of the bloc’s lenders will embody an exceptionally unfavourable state of affairs for the economic system, with a big influence on inventory costs and actual property valuations.
“It is the harshest (state of affairs) on report that we’ve within the within the European Union,” Enria mentioned.
Reporting by Balazs Koranyi; Modifying by Chizu Nomiyama
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