ECB’s Knot: Impact of Rapid Rate Hikes ‘Could Have Been a Lot Worse’ in Financial Sector

31 October 2024

ECB’s Knot: Impact of Rapid Rate Hikes ‘Could Have Been a Lot Worse’ in Financial Sector
Klaas Knot, governor of de Nederlansche Bank, at the ECB’s Governing Council meeting in Ljubljana on October 17, 2024. Photo by Adrian Petty/ECB.

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Klaas Knot said on Thursday that the impact of rapid interest rate hikes on the banking sector could have been much more adverse.

In an on-stage conversation at the Santander International Banking Conference in Madrid, Knot, who heads de Nederlansche Bank, said that ‘[w]hen we sort of came into a new situation with renewed turbulence, actually the banks’ core of the financial system… they handled that pretty well’.

Knot said that if someone had told him that the hiking cycle would only impact on a couple of ‘second-tier US banks’ and Credit Suisse in Europe, ‘I would say so far, so good. It could have been a lot worse’.

On new challenges and opportunities, he said that the Financial Stability Board was focussing on AI and tokenisation.

Even if the latter had not ‘taken off the ground yet’, he said he believed it had a considerable potential.

‘We think that AI has also huge opportunities in creating more operational efficiency within financial institutions’, he said.