In an interview with Philip R. Lane, a member of the Executive Board of the ECB, he stated that the euro area banking system is strong, stable, and less vulnerable compared to banks in the US, due to the strict supervision by the European Central Bank and high capital and liquidity ratios of the banks. He also mentioned that the risk of rising interest rates causing unrealised losses on European banks’ fixed-income portfolios is well-contained due to the proper management of bond portfolios and adequate capital to guard against any loss in value.
Regarding the implementation of the European deposit insurance scheme (EDIS), Lane emphasized that arriving at a full banking union, including EDIS, is a step-by-step process and requires momentum and necessary steps to be delivered.
On monetary policy, Lane stated that the ECB’s decision on interest rates in May will depend on three factors: the inflation outlook, the underlying dynamic, and how quickly interest rate increases are restricting the economy and bringing down inflation. He mentioned that the focus should be on understanding every data point that comes in rather than predicting the next decision.
Overall, Lane expressed confidence in the euro area banking system and stressed the importance of cautious and gradual adjustments in monetary policy.
https://www.ecb.europa.eu/press/inter/date/2023/html/ecb.in230406~cec3e0011a.en.html
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