Name: Committee on Economic and Monetary Affairs Ordinary meeting
Uploaded: 2026-07-02T08:00:00+00:00
Duration: 6639 s

03:57 - 05:27

Speaker 5

So, good morning everyone. I would like to welcome to this public hearing in the ECON Committee, Ms. Claudia Buch, Chair of the Supervisory Board established at the ECB in the framework of the SSM. In your opening statement today, you will be addressing bank resilience in an era of geopolitical and AI-related risk, two very high topical issues. For instance, in early June, the plenary of the Financial Stability Board stressed in this regard that the conflict in the Middle East and the implication of the usage of new powerful frontier AI models have further complicated the risk landscape. These two risks are also highlighted in the latest ECB Financial Stability Review of May 2026.

Last but not least, in a recent interview, you reminded banks to treat cyber resilience as a strategic priority and to allocate adequate resources to address evolving cyber threats. So, we are very keen to have this exchange of views today. As always, you will have the floor for an opening statement and then there will be a Q&A session with the members of the ECON Committee. Welcome.

05:27 - 10:08

Speaker 2

Thank you very much, Chair. Good morning to you, the members of the European Parliament. Indeed, euro area banks are facing a complex not only geopolitical risk but also complex institutional environment and framework. And reforms can reduce undue complexities in regulation and supervision. This would remove frictions that could impede growth.

But at the same time, and you've stressed this, European banks are facing a complex risk environment. And safeguarding the resilience of banks as a foundation for sustainable growth is equally important. We need a reform agenda that further strengthens the system. And the European Parliament's recent views on the banking union, the upcoming report of the European Commission on the EU banking sector can inform this reform debate. The ECB and the Eurosystem have made their own proposals which stress promotion of the single market, completing the banking union while preserving strong supervisory and regulatory standards.

And let me give you two recent examples, recent developments that underline the importance of these proposals. The first one is that geopolitical risks have materialized in the form of military conflicts and higher tariffs. Growth forecasts have been revised downward, corporate insolvencies have increased. It is too early to tell how geopolitical risks affect banks' balance sheets. Current financial indicators of euro area banks remain robust.

We have strong capitalization, low levels of non-performing loans. But weaker growth can take quarters up to years to translate into weaker asset quality. This is why banks need to assess how recent shocks could affect borrowers, collateral values and their own loss-absorbing capacity over time.

They need to also consider that more limited fiscal space constrains the capacity of the fiscal authorities to buffer shocks. Robust capital positions remain essential to absorb shocks and continue providing services to the economy and ultimately to promote growth. The evidence shows adequate capital requirements do not undermine banks' competitiveness or lending. Banks currently have sufficient capital headroom to lend and they have payout ratios of around 50%. The weaker credit growth that we're seeing in some parts of the system reflect rather weak demand and high uncertainty, not constraints due to capital requirements.

And more broadly speaking, European capital requirements are generally aligned with the Basel framework and broadly comparable internationally. The overall requirements in the system have remained largely unchanged compared to 2019, so the year right before the pandemic. During the pandemic, capital requirements were temporarily lowered. Since then, macroprudential buffers have been built up that can be released in times of stress. Let me come to the second recent development, the development of new AI tools and the related cyber risks.

But let me put this into a bit broader perspective because ultimately one key driver of banks' competitiveness is their ability to further develop sustainable digital business models. So in doing so, they need to look at their operational resilience, balancing the risks and benefits of digital innovation, including the use of artificial intelligence, AI tools. More than 85% of banks under our supervision use AI tools. About 40% use them in a way that is relevant for their for their business model. Now the development of new frontier large language models could change banks' cyber defenses.

The speed, scale, and accessibility of advanced cyber tools are increasing and the response time available to defenders is shrinking. Moreover, the critical infrastructure on which banks rely could become the target of cyberattacks. So these are cloud services, telecommunication networks, payment systems, but also electricity supply. So to maintain trust in their operations, banks must respond effectively to cyber threats. This implies on the side of the banks that the management must take ownership of this issue and provide adequate resources.