The ECB described three types of shocks for the European banking system
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Experts from the European Central Bank (ECB) assessed the resilience of the European banking system to three types of shocks. The conclusions of the regulator’s analysts are presented in the study “Stress testing with multi-faceted liquidity: the central bank collateral framework as a financial stability tool”.
The first – the least painful – scenario involves a crisis in the financial market of Eastern Europe: in the Baltic countries, Slovakia, Slovenia and Russia. In particular, such events as the depreciation of public debt, corporate and retail loans. This type of shock causes the European banking sector to lose 6.5-10% of capital, depending on the intensity of the crisis.
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