Euro area banks’ connections with non‑bank financial intermediaries (NBFI) expose the banking system to rollover and deleveraging risks that could amplify asset price shocks and trigger fire sales. Redemptions by NBFI investors may cause liquidity withdrawals from banks, while banks might pro‑cyclically cut leverage to NBFI clients during market turbulence, potentially inducing a deleveraging spiral. These mechanisms are intertwined, share a common trigger, and could be self‑reinforcing. Euro area banks exhibit concentrated, idiosyncratic, and volatile asset and liability‑side exposures with G‑SIBs playing a critical role that is difficult to replace, underlining the need for strong loss‑absorbing capacity. Data gaps—especially regarding leveraged NBFI balance sheets and cross‑border funding—limit a full assessment of systemic risk; complementary datasets such as Alternative Investment Fund Managers Directive data could provide deeper insights.
© European Central Bank, 2025.
Summary derived from the ECB website (https://www.ecb.europa.eu ).
https://www.ecb.europa.eu/press/financial-stability-publications/fsr/special/html/ecb.fsrart202511_02~e2f82a64bf.en.html
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