ECB Says Eurozone Banks Well Equipped To Cope With Rate Shocks

ECB Says Eurozone Banks Well Equipped To Cope With Rate Shocks”

On average, banks' net interest income will decrease 7.5 percent by 2019 if interest rates remain at their present historic lows.

The results come as the European Central Bank prepares to start dialling back its monetary stimulus after years of ultra-low interest rates and massive bond purchases, paving the ground for rate hikes further down the line.

He vowed: "we will fight a battle in Europe".

Long recovery procedures have been a disadvantage for Italian banks since the new rules require banks to set aside cash at regular intervals against loan losses. So in order to speed up the European banking union. you need to bring your own house in order in every country.

Italy has doubts whether the European Central Bank's approach to tackling non-performing loans in the euro zone is correct, and will discuss it in the coming weeks, Finance Minister Pier Carlo Padoan said on Monday. Banks with well managed rate risk could see their capital requirements fall.

However, the bank said that it needed thorough discussions with 51 of them after finding they may be making themselves vulnerable on massive bets on derivative instruments and overly aggressive models for calculating risk.

Earnings at some banks have lagged due to the current very low interest rate environment that squeezes the margins between rates at which banks borrow and their lending rates.

Italian banks have been hit by concerns the ECB may extend the new rules also to the bloc's huge stock of bad debts, of which they hold almost 30 percent.

Net interest income would increase for 76 per cent of the banks tested, but the economic value of equity - a proxy measure of how much the bank can earn from its balance sheet - would fall for 77 per cent of banks.

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