By Elizabeth Howcroft PARIS, April 16 (Reuters) - European lenders are resilient enough to absorb current financial and geopolitical shocks but need to prepare for future uncertainties including
European Banks Strong Enough for Shocks, Must Prepare for AI, Cyber Risks
European Banking Sector Resilience and Emerging Threats
By Elizabeth Howcroft
PARIS, April 16 (Reuters) - European lenders are resilient enough to absorb current financial and geopolitical shocks but need to prepare for future uncertainties including cybersecurity risks from AI, François-Louis Michaud, the new head of the European Banking Authority, said.
Geopolitical Risks and Financial Stability
Banks' ability to absorb big shocks has come into focus as financial markets come under strain from the U.S. and Israeli war on Iran. The European Central Bank last month warned that markets were underpricing the stress on the financial system coming from geopolitical risks, which have become the number one concern for central banks.
The ECB has made strengthening lenders' resilience to geopolitical risks a key priority for this year and will stress test the largest banks.
Statements from the European Banking Authority
Michaud, who took the reins at Europe's banking watchdog on Thursday, said in a press briefing the day before that banks were "resilient enough" to withstand geopolitical risks, adding that banks have big capital and liquidity buffers in place. The comments were embargoed for release on Thursday.
"We also know that what's coming next will not be very much like what we’ve been seeing in the past, and we need to be prepared for that," he added.
AI Risks and Cybersecurity in Banking
Emerging Threats from Artificial Intelligence
AI RISKS TO CYBERSECURITY
A growing supervisory concern is cybersecurity, as banking regulators grapple with a new artificial intelligence model, Anthropic's Mythos, which cybersecurity experts say could create complex cyberattacks and pose a threat to the banking industry. U.S. authorities had an urgent meeting with bank CEOs last week about it, and the ECB is due to ask banks about their preparedness for the risk.
Regulatory Response to AI-Driven Cyber Threats
Asked about Anthropic's new model, Michaud said the risks and opportunities from new technology were one of the watchdog's priorities.
"At every board meeting that we have, we have a very thorough discussion about risks, and we discuss precisely that type of thing: cyber threats, what we see from the different parts of the sector, et cetera. So it's front and centre. We're constantly discussing it," he said.
The European Union is trying to protect its financial sector from risks around its reliance on external technology providers.
Private Credit and Systemic Risk
Michaud also said that private credit did not represent a systemic issue for European banks.
Concerns about poor lending standards in the relatively opaque private credit industry have rattled financial markets in the past six months, with regulators worried about interlinkages with traditional, more regulated finance.
(Reporting by Elizabeth Howcroft; Editing by Tommy Reggiori Wilkes)
