German regulator urges banks to set aside bumper profits for bad news on the horizon
Publishing timestamp: 2024-01-24 05:37:45
Summary
The banking industry experienced a windfall in 2023 due to central banks' interest rate hikes. However, the head of the German regulator warns that banks should set aside profits to prepare for potential loan defaults as the impact of higher interest rates on the economy is yet to be fully felt. The focus has now shifted to when central banks will start cutting policy rates again. The euro zone economy is expected to be in a recession, and Germany in particular is projected to face a prolonged slump. Banks are advised to increase their loan loss provisions and invest in operational security and stability. Insolvencies are expected to rise as interest rates increase, and banks need to be prepared for potential credit losses.
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