WASHINGTON, April 17 (Reuters) – The balance sheet of euro zone banks does not yet reflect elevated geopolitical tensions as it could take time – possibly years – for loan quality to deteriorate, European Central Bank supervisor Claudia Buch said on Friday.
Lenders have been under stress as tariffs, war in the Middle East and shifting global alliances upend global supply chains, raise inflation and dent profits.
“We haven’t seen the full effect … of these tensions, of the geopolitical risk on banks’ balance sheet,” Buch told a forum at the Institute of International Finance. “We need to be very, very vigilant.”
“It typically takes about two to three years until you have financial difficulties in the corporate sector, and it takes time until this really feeds into the balance sheets of banks,” Buch said.
Geopolitical tensions also include increased cyber threats, and Buch said it was ultimately up to banks to build resilience.
Industry experts have been focusing in recent days on Anthropic’s Mythos, a new AI model the company and cybersecurity experts warn could supercharge complex cyberattacks, posing a risk to legacy technology systems.
When asked about this specific threat, Buch said the ECB is doing broad work on cyber resilience.
“The decision to invest, what technology to use, how to innovate, all these things … on how to make sure they’re cyber-resilient, this is the task of the banks, the owners, the management,” she said. “I wouldn’t claim that we as supervisors know better what they have to do.”
However, the ECB has dedicated initiatives to understand the systemic implications and can alert banks if they are underinvesting.
“We can’t take the decisions for the banks, but we can alert them to best practices and (put) governance in place, also around their cyber-resilience and team resilience,” Buch said.
(Reporting by Balazs Koranyi; Editing by Hugh Lawson, Rod Nickel)
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