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EU leaders to focus on risk of banking contagion

By March 24, 2023No Comments

EU leaders meeting for the second day of a summit in Brussels will be briefed by the European Central Bank about the risks of contagion in the banking sector.

It follows the collapse of Silicon Valley Bank in the US and the subsequent takeover of Credit Suisse by UBS.

ECB President Christine Lagarde will update leaders on the prospects of further interest rises as Europe continues to struggle with high inflation.

Ms Lagarde will aim to reassure leaders that a deeper crisis facing the banking sector has been averted.

She is expected to say that Europe should press ahead with initiatives dating back to the last financial crisis 15 years ago, namely an EU wide deposit insurance scheme and the forging of a wider banking and capital markets union.

The collapse of Silicon Valley Bank was linked to the recent hike in interest rates in the US, which has prompted calls for the ECB to pause its own rate increases.

Ms Lagarde is unlikely to commit to such a move. The bank has been determined to use interest rates to bring down inflation.

EU leaders are today expected to ask the European Commission to move ahead with reform of the debt and deficit rules governing the single currency, the so-called Maastricht Criteria.

Those rules have been relaxed since the Covid-19 pandemic and there is an expectation that they will be made more flexible to cope with long-term economic challenges.

Article Source: EU leaders to focus on risk of banking contagion Tony Connelly – RTE

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