Excess Liquidity and Bank Lending Risks in the Euro Area
Study
14-09-2018
Low interest rates and excess liquidity in the euro area, which exceeded €1,900 billion in September 2018, might create financial stability risks. We clarify the notion of excess liquidity and highlight that its current level is primarily the result of European Central Bank asset purchases. Overall, we conclude that financial stability risks in the euro area are low, but increased home bias and housing prices necessitate full attention from macroprudential authorities. Monetary policy tools are anyway ill-suited to fostering financial stability objectives. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs Committee.
Study
External author
Zsolt DARVAS, David PICHLER
About this document
Publication type
Keyword
- BUSINESS AND COMPETITION
- central bank
- civil law
- drafting of EU law
- EU banking union
- euro area
- EUROPEAN UNION
- European Union law
- FINANCE
- financial institution
- financial institutions and credit
- financial legislation
- financial risk
- financial solvency
- free movement of capital
- LAW
- liquidity control
- management
- monetary economics
- monetary policy
- monetary relations
- PRODUCTION, TECHNOLOGY AND RESEARCH
- risk management
- technical standard
- technology and technical regulations