European Central Bank (ECB) President Christine Lagarde spoke at the 7th Annual Conference of the European Systemic Risk Board (ESRB) held in Frankfurt.
“To date, Europe’s financial system has avoided the worst-case scenario of serious systemic risks occurring simultaneously. But policymakers need to remain proactive and be alert to the emergence of financial stability risks,” Christine Lagarde said.
Referring to the words of the 16th US President Abraham Lincoln, Lagarde addressed policy makers and called for “Do not leave until tomorrow anything that can be done today.”
Recalling that the European Systemic Risk Board (ESRB) listed a number of systemic risks in September last year, ECB President Lagarde said, “It is a period of extremely high uncertainty. Russia’s invasion of Ukraine is another situation that increases the likelihood of successive scenarios coming true.” combined with other factors.” he said.
Stating that there is a serious risk of natural gas and oil shortages in Europe as winter approaches, Lagarde said, “At that time, we warned that ‘all the risks we predicted could occur at the same time and increase the impact of each other’. Fortunately, this scenario has not come true so far.” made his assessment.
Stating that concerns have been raised before that the debt payment capacity of households and companies will be affected, Lagarde noted that although employment has remained resilient so far, the real disposable income of households has come under significant pressure due to high inflation.
Lagarde continued her speech as follows:
“Secondly, we highlighted the risks arising from the sharp decline in asset prices. These have been partly reflected in the failure of US-based regional banks, the bond crisis in the UK and, more recently, the price volatility of US Treasuries.”
Underlining that some systemic risks have not yet materialized, Lagarde said, “Bank profitability will be negatively affected by the increase in funding costs and much lower loan volumes as a reflection of high policy interest rates.”