Abundant Liquidity and Bank Lending Activity: an Assessment of the Risks
This paper assesses the risks facing the euro area banking system, as it returns to normal financial conditions without ECB support. In the first part we argue that risks to bank lending mainly stem from the transmission of external monetary policy effects that may not be aligned with ECB policies. The second part of the paper therefore offers some ideas on the need to moderate spillover effects from outside monetary policies or events. We also review how far new prudential policies, regulatory measures and/or policies can be used to mitigate those unfavourable risks. This document was provided by Policy Department A at the request of the Economic and Monetary Affairs.
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External author
Andrew HUGHES HALLETT
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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