ECB’s Knot: Market Volatility Stemming from Tariffs Could Test Stability in Non-Banks

12 June 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Klaas Knot said on Thursday that market volatility created by trade tensions could test non-banks in terms of financial stability.

In a speech at the 5th Financial Stability Conference organised by the Banco de España in Madrid, Knot, who heads De Nederlandsche Bank, said that ‘[t]he recent bout of tariff-related volatility in global markets could serve as a test’ for the non-bank financial intermediation sector.

Despite some deleveraging and large margin and collateral calls, the system did not break, he said.

‘That is encouraging. But let’s be honest: we can’t credit our reforms just yet’, he said. ‘Because the FSB’s recommendations have not yet been implemented in full.’

Knot called for authorities to put these recommendations into laws and regulations.

15 years later, there were calls for deregulation again, which was not to be mistaken for simplification, said Knot.

‘Deregulation means effectively lowering buffers by relaxing the rules’, he said. ‘That would both reduce resilience in the banking system and increase the likelihood of financial crises.’

The progress made should not be undone, he said.

· ECB’s Knot: Can’t Exclude nor Confirm There Will Be a Cut in June

· ECB’s Knot: Medium-Term Inflation Impact of Tariffs Ambiguous

· ECB’s Knot: ‘This Is Actually a Time in Which We Need Projections’