The balance sheets of euro zone banks are showing “early signs of stress” after a rise in loan defaults and late repayments from historic lows, the European Central Bank (ECB) has warned. Officials urged lenders to increase provisions to cover rising loan losses and predicted their profits would be hit by a drop in lending volumes and increased funding costs. The ECB has increased interest rates by an unprecedented 4.5 percentage points in the past year.
“A longer period of high interest rates is likely to lead to higher provisions, which in turn will be a drag on profitability further down the line,” the central bank said at its twice-yearly financial stability revie
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