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European financial stability: what are the main emerging risks? (strains from indebtedness, banking risks …)?

European financial stability: what are the main emerging risks? (strains from indebtedness, banking risks …)?

Day 3 Morning

Friday 23 February

Room :

ROOM 1

Speakers

Chair
Mark Branson
President & Member of the Supervisory Board, SSM - Federal Financial Supervisory Authority, Germany (BaFin)
Public Authorities
Kerstin af Jochnick
Member of the Supervisory Board - European Central Bank (ECB)
Agnès Bénassy-Quéré
Deputy Governor - Banque de France
Sarah Breeden
Deputy Governor for Financial Stability - Bank of England
Margarita Delgado
Deputy Governor - Banco de España
Industry Representatives
Thomas Hirschi
Head of Banks Division - Swiss Financial Market Supervisory Authority (FINMA)
Masamichi Kono
Senior Advisor, MUFG Bank, Ltd & Member of the MUFG Global Advisory Board, Mitsubishi UFJ Financial Group & Trustee, IFRS Foundation - MUFG Bank, Ltd
Tanate Phutrakul
Chief Financial Officer & Member of the Executive Board - ING Group

Objectives

After 15 years of zero or negative key interest rates in real terms, the need to raise rates to combat inflation created the ingredients for a major financial crisis: the bond portfolios built up during this period of persistent very low interest rates have seen their value plummet since then. This lasting zero-interest rate policy therefore played a major role in the genesis of the current crisis.
The session will discuss the financial stability impacts of the economic environment – characterized by persistent inflation, low growth, very high levels of public and private debt and asset valuation in many countries and increased nominal interest rates – on the financial industry. The panel will also focus on the main risks that stem from the Non-Bank Financial Intermediation and assess if they are appropriately addressed in Europe in particular, bearing in mind that a specific session on NBFI risks will take place immediately after this session.

This session will not address climate, crypto-asset and operational related risks as they are covered in other sessions of the Eurofi Ghent event.

Points of discussion

  1. Given the record levels of public debt in some European countries and the high level of indebtedness of a number of companies and households in Europe, what is the impact of rising interest rates on the debt sustainability of these governments, companies and households?
  2. Is there a risk of a financial crisis being triggered in this economic environment of low growth, record debt levels and high valuations of certain financial assets (equities, real estate, etc.)? Taking into account the significant public and private indebtedness in many EU countries, what are the impacts of the macroeconomic environment (high inflation, weak growth, increased interest rates) on the asset quality of EU banks (derivative exposures, corporate vulnerabilities, commercial real estate…)? What are the main risks that stem from the Non-Bank Financial Intermediation in Europe in the current macroeconomic context?