According to the European Central Bank (ECB), the risks and challenges for financial stability in the eurozone have also increased due to interest rate policy. Although low interest rates helped the economy, ECB Vice-President Luis de Guindos said in presenting the bi-annual Stability Report. However, a resulting increase in risk appetite could create problems for financial stability in the medium term. De Guindos called for action against weaknesses by all means.
The key interest rate in the euro zone has been at zero percent since March 2016. Investment funds and insurers, in particular, could lead the ECB experts to assume that the environment is taking excessive risks. This is also to be feared in individual real estate markets. This could become a problem when the price environment changes again.
The ECB also expressed concerns about high levels of debt and budget deficits in some euro area countries. Should the economy weaken significantly, countries with fragile financial markets could once again come into focus, the report said. In addition, the earnings prospects of the banks would have continued to deteriorate.
ECB President Christine Lagarde, who has been in office since 1 November, had made it clear before she took office that she felt that a very loose monetary policy was necessary in the foreseeable future. But Lagarde had also said: "We have to keep an eye on the negative consequences and side effects."