European Banks Strong Enough to Withstand Shocks, Watchdog Says

European banks are well-positioned to withstand current financial and geopolitical shocks, but must prepare for emerging risks, including cybersecurity threats linked to artificial intelligence, according to the European Banking Authority.

The European Central Bank has warned that markets may be underestimating the financial stress associated with geopolitical risks.

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François-Louis Michaud said lenders have strong capital and liquidity buffers, enabling them to absorb volatility stemming from global tensions, including the ongoing Iran conflict.

The European Central Bank has warned that markets may be underestimating the financial stress associated with geopolitical risks, which have become a top concern for policymakers.

The ECB plans to subject major banks to stress tests as part of its effort to strengthen resilience across the financial system.

Michaud emphasized that while banks are currently stable, future challenges may differ significantly from past crises, requiring continued vigilance and preparation.