FRANKFURT (Reuters) – European Central Bank supervisors will zero in on bad loans this year after finding that some euro zone banks had set too little money aside for them or were slow in recognising the problem, the ECB said on Wednesday.
Presenting its annual review of the sector, the ECB said euro zone banks generally had more capital than required, and a profit boost from rising interest rates had offset the economic damage from the war in Ukraine.
But it demanded more capital from 24 banks that “fell short of coverage expectations related to non‑performing loans”, inviting them to close that gap this year.
More generally, the ECB had found “persisting risk control deficiencies”, particularly in how to classify loans that are at risk of going unpaid.
“Banks need to address persistent weaknesses, particularly in their risk control and governance frameworks, and to assess future developments in a prudent way,” the ECB’s top supervisor Andrea Enria said in a statement.
Earlier on Wednesday, France’s Societe Generale said it had raised its provisions for souring loans in the last quarter, resulting in a 35% decrease in profit from the same period a year earlier.
(Reporting By Francesco Canepa; Editing by Kevin Liffey and Christina Fincher)
