“At this stage, it is too early to predict the trajectory of asset quality” of banks. This is what Christine Lagarde, number one of the ECB said, in the speech with which she opened the fourth forum of the European Central Bank dedicated to Banking supervision.
“Indicators moving at high speed, such as the change in forborne loans and Stage 2 loans, are already showing signs of deterioration. But the definitive impact (of the Covid-19 crisis) on NPLs (non-performing loans) will manifest itself. with a delay of several years, and will crucially depend on the strength of the recovery. Banks should have robust risk controls in place to be alerted to these risks and to address them early. “
Lagarde also noted, in her speech, that “the pandemic has triggered fundamental changes in the environment in which banks operate, accelerating the digital transformation and underlining the urgency to tackle climate change, both issues which inevitably have a impact on banks “.
“When it comes to digitization, consumer preferences are changing rapidly. New players – from fintech to large technology companies – are increasingly competing in the financial services market. This creates an opportunity for euro area banks, which have faced low profitability and cost efficiency, to refocus their business models. The banking sector has seen a 23% increase in first time digital users (for the first time) since the start of the pandemic. ” .