Interview with Anneli Tuominen for Die Presse

Interview with Anneli Tuominen, Member of the Supervisory Board of the ECB, conducted by Madlen Stottmeyer on 17 March 2026

25 March 2026

Europe’s banks are making more money now that the interest rates have risen than they have done for a long time. Is the system actually stronger today or are banks simply profiting from a temporary interest rate effect?

Europe’s banking sector is now much stronger and more resilient than it was when European banking supervision was created. The Common Equity Tier 1 ratio has increased from 12.7% to 16.2% and the share of non-performing loans has fallen from 7.5% to 1.9%. The cost structure has also improved. And this is despite a series of major crises: the pandemic, the banking turmoil in the United States and Switzerland and Russia’s full-scale invasion of Ukraine.

The interest rate cycle has significantly helped profitability recently, there’s no question about that. Return on equity was 9.5% at the end of last year, having averaged just 5.4% in the years 2015-21. But it’s not the whole story. Banks have stronger capital and liquidity and are generally in better shape than before. The interest rate effect has helped, but it’s not at the core of this development.

What’s the biggest weakness of the European banking system at the moment?

I’d highlight two here. First, the macro-financial uncertainty due to geopolitical tensions. It’s hard to say how long these tensions will persist and how strong their impact will be on the economy. They affect credit, liquidity, market and operational risk all at the same time.

Second – operational resilience. In this increasingly digital world, we’re seeing a rise in cyberattacks and vulnerabilities. These risks are closely interconnected with geopolitical developments. This is why, as supervisors, we are very much focused on this topic, carrying out targeted reviews, on-site inspections and cyber stress tests.

Many say that the real test will come when the economy tips over and credit defaults begin to rise. Are supervisors preparing for this difficult phase?

Yes, we are. For a long time now we have required banks to model negative scenarios. And this year we will be carrying out a reverse stress test on geopolitical risks. Rather than defining a scenario ourselves, we will ask banks to identify what scenario would lead to a capital depletion of 300 basis points. It makes banks really consider their strategy and business model more closely.

In addition, we are currently undertaking a thematic review of banks’ credit underwriting practices, including a data collection exercise, to ensure that lending standards remain robust.

Commercial real estate is considered to be a risky area across the world. How exposed are European banks?

The starting point is now better than it was – the banks are in better shape overall. But we do see vulnerabilities in the commercial real estate markets which have been brought about by tighter lending standards, higher interest rates and changes to working and consumption habits – take remote working and e-commerce, for example.

We have considered this topic closely as part of our on-site inspections. We found that collateral valuations were not always correct. We also voiced concerns about interest-only loans. The situation differs depending on the country. But I would like to stress that this market is not out of the woods yet.

Is Austria among the highly exposed countries?

Yes, Austria is one of the countries where the risks in this area are relatively high in certain banks.

ECB stress tests almost always conclude that Europe’s banks are robust. Critics say that the test scenarios are too predictable and not strict enough. Do they have a point?

No, I don’t see it that way. The stress tests are an important tool and we have a prudential obligation to conduct them regularly. They help us assess whether banks can handle a deteriorating environment.

And of course these scenarios have to be plausible. If they were unrealistically harsh, the results wouldn’t be very helpful. Also, these tests are not just for the supervisors, they are also there to inform the public. By the way, the latest stress test was one of the strictest – the assumed losses in the adverse scenario amounted to around €628 billion, which would have pushed Common Equity Tier 1 ratio down by close to 4 percentage points. The fact that the results were decent is a testament to the banks’ recent profitability.

European banks are still less profitable and less globally dominant than their American peers. Is this a result of excessive regulation, or is it because Europe still lacks a truly integrated banking market?

There are many reasons, but Europe’s fragmentation is certainly a key one. Mario Draghi rightly pointed out that European banks operate on a smaller scale and face higher costs. The US market is large and well-integrated. There, banks can grow more easily, invest more in IT and generate more income, especially in investment banking and trading.

In Europe, we have 27 Member States, different insolvency regimes, different supervisory practices, and different tax and consumer protection frameworks. The banking sector is still organised largely along national lines. We would like to see more banks operating across borders, growing and benefiting from scale effects.

To achieve this, we need to make progress on the banking union. In my view, a European deposit insurance scheme, or something very similar, would be key in this regard. Without greater integration, the European banking sector will not be able to fully realise its potential. Politicians need to understand that markets would function more efficiently with more integration. This would benefit everyone. We need a complete banking union and capital markets union to facilitate the flow of capital and liquidity.

Banking crises are often caused less by a lack of capital than by poor governance. How does the ECB detect governance-related problems before they become dangerous?

Governance is one of the areas we monitor continuously. Members of management bodies undergo fit-and-proper assessments, in which we evaluate their reputation, experience, independence and collective suitability.

It has also become increasingly important that members of management bodies have sufficient expertise in cyber risk, digitalisation and climate. These topics need to be understood and managed at board level. We still see room for improvement here, for example in risk data aggregation, risk reporting or in internal risk management. Good governance remains a key factor for stability.

Following several money laundering scandals, Europe is now getting a new central authority in the form of the Anti-Money Laundering Authority (AMLA). Is this a breakthrough in the fight against money laundering?

It’s certainly a step in the right direction. The logic is similar to that of European banking supervision after the financial crisis – when problems are cross-border in nature, national supervision alone is not enough. Money laundering doesn’t stop at national borders, so a central and coordinated authority is needed to see the full picture.

AMLA has a very demanding mandate. Digitalisation, artificial intelligence and crypto are creating new opportunities for financial crime. We do not want financial crime in the European financial system. And to be perfectly honest: laws alone are not enough. In some cases, rules already existed, but national supervision was not strong or consistent enough. That is precisely why an EU-wide framework is needed.

You headed the Finnish Financial Supervisory Authority for many years before joining the ECB. What changed most in your perspective when you moved from national supervision to the European level?

The biggest difference was benchmarking. At the European level, you can compare banks and supervisory practices across countries. This is extremely important for creating a true level playing field.

Another factor is the analytical depth of an institution like the ECB. It enjoys a great deal of expertise and a lot of capacity. But the first – and perhaps most important – difference is really the ability to make much more systematic comparisons and derive good practices from them.

If we look five years ahead, what will be the biggest challenge for European banking supervision?

In the short term, geopolitics will remain the biggest challenge. In the medium term, the key issue will be how the banking sector evolves through digitalisation, innovation and artificial intelligence – and how closely banks become interlinked with non-bank financial institutions.

In this context, we need better data quality so that we can identify risks early and prevent contagion. And we need to continue strengthening banks’ operational resilience. Especially in times of geopolitical uncertainty, this is crucial – not only for banks but for all critical sectors in society.

My personal view is that given the unprecedented level of geopolitical uncertainty, the EU should be prepared to take measures to develop a more competitive and more integrated banking market, all while preserving its resilience. This would mean facilitating finance in the EU by streamlining the regulatory framework, finalising the third leg of the banking union and creating a savings and investments union.