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The banking turmoil plays a significant role for the interest rates.

 

Christine Lagarde has acknow­ledged that tur­moil in the bank­ing sec­tor could force the European Cent­ral Bank to stop rais­ing interest rates, should the recent mar­ket jit­ters hit lend­ing to the euro­zone’s busi­nesses and house­holds. «We are not talk­ing about bil­lions here; we are talk­ing about mil­lions,» Lagarde said, adding that the euro­zone bank­ing sys­tem was «strong in terms of its aggreg­ate cap­ital and liquid­ity pos­i­tion». «We are already see­ing some tight­en­ing of fin­an­cial con­di­tions,» Lagarde said. «That might be accen­tu­ated by the ten­sions in the bank­ing sys­tem, and we will have to take that into account as part of the data we review as part of our next mon­et­ary policy decision».

Total euro­zone lend­ing by banks in the bloc con­trac­ted by €61bn between Janu­ary and Feb­ru­ary, the most significant monthly decline since 2013. The ECB said in Janu­ary that its quarterly sur­vey of lenders showed they had tightened their cri­teria on busi­ness loans the most since the region’s 2011 sov­er­eign debt crisis. Euro­zone lenders were «well super­vised», she said, with more than 2,200 banks in Europe covered by Basel III rules requir­ing a min­imum level of liquid assets. In the US, just 14 banks are required to meet glob­ally agreed Basel stand­ards, with only the biggest lenders need­ing to fol­low the rules.

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