ECB’s de Guindos: ‘Euro Area Financial Stability Outlook Is Fragile’

17 October 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Tuesday said that the financial stability outlook was delicate.

Speaking at a dinner at the ECB, a text of which was posted to the website of the ECB, de Guindos said that ‘the euro area financial stability outlook is fragile, as the financial system adapts to a higher interest rate environment.’

‘So far, most firms and households have not endured material stress, although it will take some time before the full impact of higher borrowing costs, high inflation and weak growth is felt’, he said.

However, the ECB data showed that the euro area banking system was prepared for ‘a severe adverse scenario’, he observed.

‘[C]onsidering the challenging financial stability outlook’, he said, ‘a pertinent question is whether this is the right time for macroprudential policy to release capital buffers.’

‘In our view, this is not yet the time for thinking about macroprudential capital buffer releases’ he said. ‘Despite the challenging macro-financial environment, banks are currently resilient and profitable.’