Euro Area Policies : Financial System Stability Assessment

Author/Editor:

International Monetary Fund. Monetary and Capital Markets Department

Publication Date:

July 19, 2018

Electronic Access:

Free Full Text. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Overall the resilience of large euro area banks has improved, but important vulnerabilities remain. Capital buffers are in aggregate sizeable relative to immediate threats, but some banks are especially vulnerable to credit risk and others to market risks, including a substantial rise in risk premia. The banking system as a whole has ample liquidity, against a backdrop of ECB support. At a structural level, low profitability is found in many banks across all business models, despite improving conjunctural conditions. The interconnectedness analysis shows that strong buffers are effective in dampening both vulnerabilities and onward transmission. Risks to financial stability relate mainly to tighter financial conditions, weaker growth, and policy and geopolitical uncertainties. The withdrawal of the United Kingdom from the EU (Brexit) could potentially disrupt financial market and services, and thus the wider economy. Also, policy reversals could hurt debt sustainability and test the cohesion of policy making in the union.

Series:

Country Report No. 18/226

Subject:

English

Publication Date:

July 19, 2018

ISBN/ISSN:

9781484369272/1934-7685

Stock No:

1EUREA2018003

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

86

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