Euro zone banks are well prepared for sharp changes in interest rates, the European Central Bank said on Monday after simulating scenarios from sudden monetary tightening to the lending freeze that followed Lehman Brothers’ collapse.
The results come as the ECB prepares to start dialing back its monetary stimulus after years of ultra-low interest rates and massive bond purchases, paving the ground for rate hikes further down the line.
The ECB found that higher interest rates would lead to higher net interest income in the next three years for a majority of the 111 banks in the stress test, but also to a lower economic value of their equity.
