ECB Weighs Targeted Review of Data Center Loans

November 6 — The European Central Bank, the eurozone's top banking supervisor, is considering a targeted review of data center-related loans to assess potential risks from swings in sentiment and valuations in the artificial intelligence market. People familiar with the matter told Bloomberg that senior ECB officials have raised the idea of the review internally and in discussions with the banks it supervises. As market concerns about rising interest rates and growing opposition to data center construction threaten to pressure the rapidly expanding data center lending sector, regulators worldwide are stepping up scrutiny of banks' AI-related risks. One of the people said the review could take the form of on-site inspections, focusing on how banks assess future cash flows and collateral values, and how they provision for potential defaults. Another person stressed that the scope of the investigation would not be as broad as the ECB's review of leveraged finance several years ago, which strained relations between supervisors and banks. At present, the ECB has not yet determined the specific approach for reviewing data center and broader AI risks.