The knock-on effects from the European sovereign debt crisis have led to considerably higher risks of financial instability in Europe, the continent's super-watchdog, the European Systemic Risk Board said on Wednesday.
"Risks to the stability of the EU financial system have increased considerably," the ESRB said in a statement.
"The high inter-connectedness in the EU financial system has led to a rapidly rising risk of significant contagion. This threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond."
European policymakers are widely seen as being slow in the fight to contain the crisis, and the International Monetary Fund warned on Tuesday that Europe and the United States could slip back into recession next year without bold action.
The ESRB, designed to take a bird's eye view of Europe's financial system and flag up any emerging problems for relevant authorities to act on, called for "decisive and swift action".
It said supervisors "should coordinate efforts to strengthen bank capital, including having recourse to backstop facilities, taking also into account the need for transparent and consistent valuation of sovereign exposures".
The ESRB echoes comments made by the International Monetary Fund in August when it called for a recapitalisation of European banks -- a move that was fiercely criticised by bank executives at the time.
But since then, banks have become increasingly shy of lending to each other, more often turning now to the European Central Bank for funding and deposits. In the ECB's most recent weekly tender, banks took 201 billion euros -- the highest sum since early February.
For potential backstop, the ESRB pointed to the European Financial Stability Facility (EFSF), which can lend to governments in order for them to recapitalise their banks.
The ESRB also addressed concern about high-frequency trading and exchange-traded products by suggesting targeted disclosure and increased cooperation between securities market and banking sector supervisors might be needed, among a number of measures.
The ESRB opened for business at the start of the year, billed as one of Europe's main responses to avoid a repeat of the recent financial crisis. It has no formal teeth, although if it is not satisfied with authorities' reactions, it has the option of going public with its fears.
Source: www.reuters.com
"Risks to the stability of the EU financial system have increased considerably," the ESRB said in a statement.
"The high inter-connectedness in the EU financial system has led to a rapidly rising risk of significant contagion. This threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond."
European policymakers are widely seen as being slow in the fight to contain the crisis, and the International Monetary Fund warned on Tuesday that Europe and the United States could slip back into recession next year without bold action.
The ESRB, designed to take a bird's eye view of Europe's financial system and flag up any emerging problems for relevant authorities to act on, called for "decisive and swift action".
It said supervisors "should coordinate efforts to strengthen bank capital, including having recourse to backstop facilities, taking also into account the need for transparent and consistent valuation of sovereign exposures".
The ESRB echoes comments made by the International Monetary Fund in August when it called for a recapitalisation of European banks -- a move that was fiercely criticised by bank executives at the time.
But since then, banks have become increasingly shy of lending to each other, more often turning now to the European Central Bank for funding and deposits. In the ECB's most recent weekly tender, banks took 201 billion euros -- the highest sum since early February.
For potential backstop, the ESRB pointed to the European Financial Stability Facility (EFSF), which can lend to governments in order for them to recapitalise their banks.
The ESRB also addressed concern about high-frequency trading and exchange-traded products by suggesting targeted disclosure and increased cooperation between securities market and banking sector supervisors might be needed, among a number of measures.
The ESRB opened for business at the start of the year, billed as one of Europe's main responses to avoid a repeat of the recent financial crisis. It has no formal teeth, although if it is not satisfied with authorities' reactions, it has the option of going public with its fears.
Source: www.reuters.com
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