The Russian-Ukrainian conflict increases risks for financial stability (ECB)

Photo taken on January 1, 2022 shows the headquarters of the European Central Bank lit up to celebrate the 20th anniversary of euro banknotes and coins in Frankfurt, Germany. (Xinhua/Lu Yang)

The conflict in Ukraine has resulted in “tremendous human suffering”, said ECB Vice-President Luis de Guindos. Financial stability risks have increased as the conflict has impacted all aspects of economic activity and financing conditions, he said.

FRANKFURT, May 25 (Xinhua) — Financial stability conditions in the euro zone have deteriorated as the conflict between Russia and Ukraine pushes prices higher and increases risks to inflation and economic growth , the European Central Bank (ECB) said on Wednesday.

The ECB warned in a report that “vulnerabilities could increase” due to conflict uncertainties and changing expectations for policy normalization in advanced economies.

The conflict in Ukraine has resulted in “tremendous human suffering”, said ECB Vice-President Luis de Guindos. Financial stability risks have increased as the conflict has impacted all aspects of economic activity and financing conditions, he said.

A consumer shops at a supermarket in Berlin, capital of Germany, April 27, 2022. (Xinhua/Ren Pengfei)

“Commodity and energy prices remained high and volatile, which caused some tension in the derivatives markets for these products,” the ECB said in a press release.

“Some assets remain at risk of further corrections if the growth outlook weakens further and/or inflation turns out to be significantly higher than expected,” he said.

Meanwhile, eurozone non-financial corporations have been exposed to default risk as pressure from rising input prices and weaker economic growth intensifies.

The ECB suggested that a more effective capital buffer framework should help strengthen the resilience of the financial system and called for stronger regulation to address risks in the non-banking financial sector.

Photo taken on Feb. 24, 2022 shows the DAX index on a mobile phone screen outside the Frankfurt Stock Exchange in Frankfurt, Germany. (Xinhua/Lu Yang)

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