HomeFinancial MarketsECB Vice-President Warns Of Broad Financial Sector Risks

ECB Vice-President Warns Of Broad Financial Sector Risks

European Central Bank (ECB) Vice President Luis de Guindos revealed in a speech on Saturday that the ECB is monitoring broad risks across the financial sector as part of its effort to safeguard financial stability in the eurozone.

De Guindos added that while the region had financial stability thanks to its banks’ strong capital and liquidity positions, there are wider financial risks that need to be monitored.

“In our view, vulnerabilities in the financial system prevail in the non-bank financial sector, “In our view, vulnerabilities in the financial system prevail in the non-bank financial sector which grew fast and increased its risk-taking during the low-interest rate environment,” de Guindos observed.

He recommended that policy reforms be implemented in order to address such threats. Among the reforms that de Guindos recommended were boosting liquidity preparedness, reducing liquidity mismatch, and mitigating risk from leverage.

While the ECB has long engaged in interest rate hikes as a means of combatting inflation, concerns have raised that the resulting higher borrowing costs are creating financial difficulties in other ways.

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