ECB’s Guindos Told Ministers Some EU Banks May Be Vulnerable

(Bloomberg) -- European Central Bank Vice President Luis de Guindos told finance ministers on Tuesday that some European Union banks could be vulnerable to rising interest rates.

Elaborating on the state of the financial industry after the collapse of Silicon Valley Bank, Guindos told the regular Ecofin meeting in Brussels that lenders in the region are much less exposed than their US counterparts, according to people familiar with the talks, who declined to be identified discussing private conversations.

All the same, Guindos said that the ECB couldn’t rule out that some lenders might be at risk because of their business models, according to the people. He cautioned not to be complacent and warned that a lack of confidence could trigger contagion.

An ECB spokesman declined to comment on the meeting.

The euro briefly erased gains against the dollar, falling to $1.0576 while bonds pared declines and money markets eased tightening wagers, pricing 34 basis points of hikes for the policy decision due shortly.

The discussion took place before a collapse in Credit Suisse Group AG’s share price prompted Switzerland’s central bank to offer it liquidity. 

Touching on a likely key theme of Thursday’s rate decision, Guindos highlighted the potential conflict between the ECB’s mission to bring down inflation and potential damage to some financial institutions from higher interest rates. 

More generally, banks in the EU are cushioned by high-quality liquidity buffers and increasing borrowing costs are supporting their margins, he told the EU ministers, the people said.

--With assistance from , , and .

(Updates with euro reaction in fifth paragraph)

More stories like this are available on bloomberg.com

©2023 Bloomberg L.P.