Bank of England Governor Mervin King Thursday said that warning signs for the debt and banking crisis remain “sufficiently red,” although funding stress for euro-zone banks should be relieved in the months ahead.
King was speaking in his role as vice-chairman of the European Systemic Risk Board, an independent body responsible for monitoring the financial stability and risks to the European Union’s financial system.
Recent “intervention by central banks is expected to assuage the funding pressures felt by banks in the EU in the near term,” the ESRB said in a statement following its meeting Thursday.
King and the ESRB further stressed that banks’ efforts to boost their regulatory capital shouldn’t discourage them from granting loans to the real economy.
The EU further needs to create resolution regimes which will allow major financial institutions to be wound down without “gaming” governments for necessary taxpayer funds, he said.
King added that the ESRB hadn’t discussed the possibility of a euro-zone member state exiting the currency bloc at its meeting Thursday, nor the impact that potential sovereign credit downgrades could have on the euro zone and its financial system.
EasyForexNews Research Team