European Central Bank warns banks to remain vigilant amid risks

Patrick Montagner: Patrick Montagner is a Member of the Supervisory Board of the European Central Bank. He delivered the keynote address at the S&P Global Ratings European Financial Institutions Conference, highlighting banks’ progress while warning against complacency in the face of geopolitical, climate, and technological risks. His remarks underscore the supervisor’s focus on proactive risk management and capital planning. European Central Bank: The European Central Bank serves as the central bank for the euro area, conducting monetary policy and overseeing banking supervision through its Supervisory Board and the Single Supervisory Mechanism. It promotes financial stability and enforces prudential standards for banks across the region. In the provided speech, the ECB uses the platform to affirm the sector’s improved resilience while urging preservation of core post-crisis regulations amid new uncertainties. Risk Environment: European banks operate in a fragmented world with more frequent shocks that interact across geopolitical, macrofinancial, and non-bank channels in ways that are difficult to anticipate. Climate and Nature Risks: Recent extreme weather events in Europe have shown that climate-related risks are already materializing and can affect asset valuations, supply chains, and borrower repayment capacity. Technological and Cyber Risks: Artificial intelligence shortens the timeline for identifying and exploiting IT vulnerabilities, forcing banks to accelerate their response capabilities and governance of frontier models.