Euro zone banks may benefit less from higher rates than expected: ECB

Euro zone bank may benefit less from higher interest rate than previously thought and their earnings could also be weighed down by higher funding costs and deteriorating asset quality, European Central Bank Vice President Luis de Guindos said.

“While higher interest rates boost banks’ net interest income, the benefits could be somewhat smaller than previously anticipated given a slowdown in lending growth and the inversion of the yield curve,” de Guindos said in a speech on Wednesday.

He added that concerns are also “mounting” about the outlook for commercial real estate loans given falling valuations, while elevated vulnerabilities among shadow banks could also spill over to euro area banks.