The rating agency Moody's maintains a stable outlook for European banking thanks to the sustained pace of economic recovery and the good level of capital that banks have to face insolvencies, according to Lusa.

The report from financial agency Moody's highlights the overall "good health" of most European financial systems. In addition to assessing capital ratios, the report stresses that the economic recovery from the crisis caused by the covid-19 pandemic will be strong enough to "absorb" the phasing out of support measures.

Moody's senior vice president Maria Cabanyes points out that the sector maintains low levels of profitability due to the low interest rate environment and "slow progress in raising rates." But loan quality has "weakened less than would be expected" as government support is reduced, noting that the "gradual" withdrawal will prevent an increase in problem loans.

Furthermore, according to Moody's, central banks will maintain an "accommodative" monetary policy as the recovery takes hold. However, there is a risk that the outlook could change to negative if the pandemic turns out to be worse than expected due to the Omicron or other covid-19 variants which could pose a risk to the economic recovery and lead to a significant increase in default rates for unsecured retail or corporate loans.

Source Lusa