ECB stress test highlights importance of credit risk
Mid-sized banks suffer higher capital depletion due to lower income from interest and fees
The European Central Bank unveiled the results of its 2021 stress-testing exercise on July 30, finding banks are broadly robust but must focus on credit risk management.
The central bank concluded the first test since 2018 shows the region’s financial system “is resilient to adverse economic developments”. Nonetheless, it also highlighted how credit risk management is key to maintaining adequate capital levels. This proved the main driver of capital depletion for European lenders under the
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