New Insight from the ECB
In the latest Macroprudential Bulletin, the European Central Bank examines the link between geopolitical risk and bank solvency. The analysis, covering 120 years of data, reveals that heightened geopolitical tensions often lead to lower bank capitalisation, impacting economic stability.
Key findings include:
- Major geopolitical events (e.g., wars, terrorism) have a non-linear effect on banks.
- Macroprudential policy and microprudential supervision play crucial roles in ensuring banks are prepared to absorb geopolitical shocks.
Explore the full article to understand how policymakers can respond to these risks and maintain financial stability.