MNI BRIEF: Financial Risks Elevated, Growth Outlook Weak - ECB
MNI (ROME) - The European Central Bank sees elevated financial stability vulnerabilities from the “volatile environment” with growth risks to the downside, geopolitical uncertainty, high valuation and risk concentration and debt sustainability concerns in some countries, the November Financial Stability Review said on.
The economy remains fragile and credit risk vulnerabilities in euro area households “could lead to weaker asset quality for banks and non-bank financial intermediaries if downside risks to growth materialize”, the report, published Wednesday, said, noting that high valuations and risk concentration “make markets more susceptible to sudden corrections”. (see MNI SOURCES: ECB Heads For 25BP Cut; Risks From Trump, Germany )
On the long run the review underlines that structural weaknesses and persistently weak productivity can also undermine financial stability in the future. The review warns that in recent years the supply of bank credit has tilted more towards less-productive firms as the real estate has received “received a disproportionate share of bank credit despite its limited contribution to TFP growth”