WASHINGTON, April 17 - The books of banks across the euro zone do not yet show the full impact of heightened geopolitical tensions, European Central Bank (ECB) supervisor Claudia Buch said on Friday, adding that deterioration in loan quality can take time to appear on bank balance sheets.
Buch told attendees at a forum hosted by the Institute of International Finance that lenders have already been operating under pressure as tariffs, the war in the Middle East and shifting global alliances disrupt supply chains, lift inflation and reduce corporate profits. But she cautioned that the direct effects on banks remain incomplete.
"We haven’t seen the full effect ... of these tensions, of the geopolitical risk on banks’ balance sheet," Buch said. "We need to be very, very vigilant."
Pointing to the lag between corporate stress and banking-sector recognition of that stress, Buch noted the typical timing involved. "It typically takes about two to three years until you have financial difficulties in the corporate sector, and it takes time until this really feeds into the balance sheets of banks," she said.
Along with trade and military tensions, Buch included rising cyber threats as part of the geopolitical risk landscape. Recent industry discussion has focused on an AI model called Mythos developed by Anthropic, which cybersecurity experts have warned could enable more complex cyberattacks and raise risks for legacy technology systems. When asked about that specific concern, Buch described the ECB's ongoing, broad work on cyber resilience.
"The decision to invest, what technology to use, how to innovate, all these things ... on how to make sure they’re cyber-resilient, this is the task of the banks, the owners, the management," she said. "I wouldn’t claim that we as supervisors know better what they have to do."
At the same time, Buch explained that the ECB has dedicated initiatives intended to assess systemic implications and to notify banks when underinvestment in resilience appears to be a concern. "We can’t take the decisions for the banks, but we can alert them to best practices and (put) governance in place, also around their cyber-resilience and team resilience," Buch said, describing the supervisory role as advisory and governance-focused rather than prescriptive.
The remarks underline the ECB supervisor's view that the full financial consequences of current geopolitical strains are not immediate and will require sustained monitoring, with particular attention to the corporate sector’s health and to technology and cyber defenses within banks.