The ECB has warned of a blow to leading European banks if the funds run into problems
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The leading banks of the Eurozone may suffer a blow if their financial clients, such as funds, insurance companies and clearing houses, withdraw their deposits or face other problems. The European Central Bank (ECB) warned about this, Reuters reports.
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The ECB study examines the risk of influence of so-called shadow banks — such as funds and other financial companies that provide financing in one form or another — on traditional creditors, and vice versa.
The study found that risks both from the point of view of bank assets, such as loans, and from the point of view of liabilities, such as deposits, were concentrated in the 13 largest creditors of the Eurozone, including eight global banks.
The biggest risk
The biggest risk identified was that shadow banks were withdrawing their funds from banks, such as deposits and repurchase agreements. They account for 13% of all liabilities of traditional banks — or more for large banks.
This could happen if shadow banks themselves suffered from outflows or lost confidence in the bank.
“This financing may be very sensitive to the credit quality of recipient banks and may increase the pressure on financing faced by banks if the reliability of their fundamental indicators has been called into question,” the ECB noted.
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Among the other channels of influence is the forced sale of assets by shadow banks, which will lead to losses for traditional banks, as their portfolios often overlap or correlate with each other, the ECB notes.
The ECB added that problems with systemically important creditors will also lead to problems in shadow banks.
“If one or a group of such (banks) find themselves in a difficult position, it is likely to have significant consequences in terms of the ability of a significant part of the sector to manage liquidity and market risks,” the ECB said.
Systemically important banks of the Eurozone
Global systemically important banks of the Eurozone:
- BNP Paribas,
- Deutsche Bank,
- BPCE,
- Credit Agricole,
- ING,
- Santander,
- Societe Generale,
- UniCredit
Source: Ministry of Finance
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