The European Central Bank (ECB) has called an unscheduled meeting of its Supervisory Board to discuss concerns over the euro zone bank sector’s vulnerabilities and stress, following a recent selloff in bank shares.
The move comes after bank stocks tumbled over the past week, triggered first by the collapse of Silicon Valley Bank in the United States and then the selloff in Credit Suisse (SIX:CSGN), which only ended after the Swiss National Bank provided a 50 billion Swiss franc ($54 billion) lifeline.
A spokesperson for the ECB said, “The Supervisory Board is meeting to exchange views and to provide members with an update on recent developments in the banking sector.”
The gathering follows a similar ad hoc meeting earlier this week and comes after the ECB raised interest rates by 50 basis points on Thursday.
According to a person familiar with the talks, the meeting aims to monitor liquidity in the euro zone banking sector and watch for any vulnerability to a run on any bank. However, the source did not expect the ECB to take any immediate action as a result of the meeting.
The recent events have spooked investors and contributed to concerns about the banking sector’s stability.
Despite the ECB’s decision to raise interest rates, bank shares rebounded on Thursday after the liquidity line to Credit Suisse, and they continued to rise on Friday.
The ECB’s concerns are not unwarranted. A recent report by the European Banking Authority showed that the euro zone banking sector’s capital adequacy ratios had fallen below pre-pandemic levels, with some banks struggling to meet the minimum requirements.
The report also revealed that non-performing loans had increased in some countries, including Italy and Greece.
The ECB has been closely monitoring the banking sector’s health and has taken several measures to support it during the pandemic, including providing cheap loans to banks and relaxing capital requirements.
However, the recent events have highlighted the need for continued vigilance and action to prevent any further destabilization of the banking sector.
As of Friday, the Euro Stoxx Banks Index was up by 1.2%, indicating some market optimism following the ECB meeting. However, the situation remains fluid, and the ECB is expected to continue monitoring the situation closely.