The European Central Bank will evaluate the handling of geopolitical risks in bank risk management plans

On January 15th, the European Central Bank hopes that banks in the region will take into account political instability and war risks when assessing their financial strength, in order to strengthen monitoring of the primary threats to the financial industry. Two senior officials from the European Central Bank wrote in a blog post on Tuesday that the central bank will evaluate how banks handle such geopolitical impacts in risk management frameworks, capital and liquidity planning, and internal stress testing. They wrote that this work will help ‘identify safe practices and further clarify our regulatory expectations’.