Addressing major financial stability risks in the current monetary context
This exchange of views will assess the resiliency of the present monetary stance as well as the financial vulnerabilities raised by lasting very low interest rates – asset bubbles, pressure on bank and insurance profitability, development of zombie firms, liquidity trap, the dangers of rising inflation, the Euro area banks’ financial stability prospects with the expected increase in credit risk for certain SMEs, the very high levels of public and corporate indebtedness in many Member States and the EU non-bank financial intermediation.
Then, the session will discuss the main priorities of monetary, fiscal policies to address these risks.
Points of discussion
- What are the key financial stability risks and the main vulnerabilities in the financial sector at the EU level in the context of lasting very low interest rates, the deterioration of credit risk, the inflationary pressures, and very accommodative fiscal policies (e.g. the level of indebtedness in the public and non-financial private sectors, the possible mispricing of risk, the swelling of asset bubbles, the increasing leverage in credit and financial markets, the ever more complex credit products containing market risk attributes increasing opacity in the markets, policy challenges to reduce fiscal support without jeopardizing the recovery…)?
- What should be the priorities regarding the evolution of monetary, fiscal and prudential policies to appropriately address these risks?