- ECB: Exit from public support of banks a particular challenge
Market news
9 December 2010
ECB: Exit from public support of banks a particular challenge
- Withdrawal of support must proceed with caution and care
- Exit must not threaten financial stability, economic recovery
- Acute concerns about addicted banks when ecb resumes exit
- Interplay between public debt problems, weak banks a risk
- Reemergence of global imbals, disorderly unwinding a risk
- If risks materialize could cause problem of systemic dimension
- See EMU debt crisis contagion risk, but low probability
- Baseline scenario sees emu financial system strengthening further
- Risk of bank funding vulnerabilities, dampened profit
- Need strong government commitment to rein in public sector imbalances
- Must improve competitiveness of and confidence in emu
- EMU banks' funding markets have improved, but still not normal
- Fiscal consolidation may weigh on bank earnings short-term
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