We are progressively emerging from the pandemic phase with a strong economic recovery. However, prudence is still advised.

We're closely monitoring the risk accumulation on bank balance sheets. Banks anticipate their ratio NPLs to total loans to continue falling this year, and in 2022. NPL numbers still appear to be positive, but asset quality appears to be worsening.

In some nations, we're also witnessing a rise of residential real estate risks. Furthermore, during 2021 Q1, some sectors saw increased bankruptcies, though these were generally lower than their pre-COVID levels. We are also closely analysing vulnerable sectors, such as food and accommodation services and commercial real estate.

The focus on asset quality should not block us from other risk sources that may be increasing. We are increasingly observing banks’ excessive search for yield and increased complexity of the financial markets.

We are encouraging banks to improve their management of risks stemming from climate change and digitalisation, while also benefitting from the associated opportunities. To overcome these challenges, banks should change their business models.

We will also continue to support efforts to complete the banking union and strengthen the regulatory framework. Our common house will continue to remain vulnerable as long as some components remain absent.

Though the economic outlook has improved, caution is essential. We will continue to remain vigilant in our approach to analysing the build-up of risks. We will continue towards our end goal of contributing to a fully fledged banking union.