FRANKFURT, (Reuters) – The European Central Bank advised banks Wednesday to be ready for a rough road as Ukraine’s war continues. A sudden rise in interest rates and a slumping economy will make markets volatile.

Just as the emergency measures were being imposed during the peak of the coronavirus pandemic (including a cap of dividend payouts), the euro zone banks emerged from them. In February, the crisis broke out and the outlook for the economy deteriorated again.

Enria stated that supervisors have now instructed banks to “reassess their expectations,” including their capital requirements.

Enria said that banks were asked to review their capital projections in light of the macroeconomic situation, as well as considering negative scenarios.

Enria, in slides prepared for an Italian banking lobby meeting, stated that rising energy and commodity prices had driven up inflation and slowed growth. This was overshadowed by a rise to bank margins caused by higher interest rates.

The upside is that he stated banks showed resilience in 2021. They continued to balance their books, despite increased corporate defaults over the past three months, when COVID-19 support was retired.