ECB warned in the Financial Stability Review that “uncertainty about global economic growth prospects has contributed to bouts of high volatility in financial markets”. And, “weaker than expected growth and a possible escalation of trade tensions could trigger further falls in asset prices”.
The report noted that materialization of downside risks to economic growth could spark greater financial market volatility. Persistent downside risks to growth reinforce the need to strengthen balance sheets of highly indebted firms and governments . Bank profitability prospects are subdued given slow progress in addressing structural issues
ECB Vice President Luis de Guindos said in the statement, “if downside risks to the growth outlook were to materialize, risks to financial stability may arise. And “the growth outlook is central to all the main risks to financial stability.”
