Market: ECB warns of risks between “shadow banks” and traditional banks

FRANKFURT (Reuters) – Big euro zone banks risk suffering if their financial clients, such as funds, insurance and clearing houses, withdraw deposits or face other difficulties, the European Central Bank warned on Tuesday.

The ECB investigation looked at the risk of contagion from “shadow finance” or “shadow banking” – which covers both activities carried out by private equity funds, speculative, investment and other money market funds – to traditional banks and vice versa.

The central bank found that exposure, in terms of both bank assets and liabilities, was concentrated in the euro area’s top thirteen banks, including its eight globally important banks.

The first risk identified is that “shadow bank” players withdraw their funds – deposits, repurchase agreements – from banks. These sources of liquidity represent 13% of all traditional banks’ liabilities, or even more for large institutions.

Payouts could occur if the shadow banking sector itself was hit by outflows or lost confidence in a bank.

Separately, if liquidity pressure forces non-banking financial institutions (NBFIs) to sell assets, this could trigger a revaluation of assets held by conventional banks as their portfolios may overlap or correlate, the ECB said.

She adds that difficulties in systemically important banks would also be a source of tension for “shadow banks”.

“If any or a group of these (banks) were to get into trouble, there would likely be significant consequences in terms of a significant portion of the NBFI industry’s ability to manage liquidity and market risk,” he said. . The latter, which used confidential data obtained as part of its banking supervisory role, did not name any company in its report.

The global systemically important banks in the euro area are BNP Paribas, Crédit Agricole, Société Générale, BPCE, Deutsche Bank, ING, Santander and UniCredit.

(Francesco Canepa, French version Laetitia Volga, edited by Blandine Hénault)

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