ECB Weighs Focused Review of Banks’ Data Center Lending Risks

The European Central Bank (ECB) is considering a focused review of euro-area banks’ data center lending to assess risks tied to shifts in AI sentiment and valuations.

ECB officials have raised the idea internally and in discussions with banks under their supervision. The review could include on-site inspections examining how lenders project cash flows from data center projects, value collateral and set aside provisions for potential defaults.

Higher interest rates and growing opposition to data center construction could put pressure on the fast-expanding lending segment. The proposed review would be narrower than the ECB’s examination of leveraged finance several years ago, which strained relations between supervisors and banks.

The ECB has not settled how it would review data center lending or broader AI-related risks.