The European Banking Authority (EBA), the EU agency that oversees the banking sector, published this Friday an analysis on the situation of entities on the continent where it focuses on the risks that impact financial institutions. Among them, the climate crises and DANA stand out.
“The recent floods in Spain, previously in Central Europe, and last summer’s heatwaves across Europe reflect the increasing frequency and severity of extreme weather events,” he explains. “These events cause economic damage, disrupt communities and call into question business continuity”, which is essential “for financial entities” which “face direct and indirect impacts”, he mentions.
“Climatic events can damage assets and infrastructure, causing financial losses for banks and insurers with interests in flood-prone areas,” argues the EBA. “For example. Indirectly, they can trigger economic crises and market disruptions – as in the case of agriculture – which affect commodity prices and lead to increased insurance claims or payment defaults due to supply chain disruptions that impact businesses.
Greater exposure to countries at risk
Furthermore, the ABE highlights that Spain is the EU state most exposed to countries with geopolitical risk. Concretely, in June this year, 10.78% of Spanish banks’ assets were located in countries that the S&P rating agency considers high risk, while the community average was 2.49%.
Concretely, it is indicated that the concentration of these exposures is concentrated in Mexico and Turkey (approximately 220,000 and 57,000 million euros), where BBVA mainly carries out its activities.
EBA sources assured during a meeting with the media that this greater exposure is due to these “significant investments in emerging countries”, which S&P describes as high risk.
Furthermore, the ABE highlights that record profits of entities due to rising interest rates have resulted in record dividend distributions and share buybacks consistent with high capital levels.
