|
|
The warning was part of the ECB's twice yearly Financial Stability Review, in which it said the outlook for banks, funds and companies, particularly in real estate, remained "fragile" as high interest rates took an increasingly hefty toll on the economy.
The ECB said liquidity buffers among shadow banks - an umbrella term for funds, insurers and other non-bank financial intermediaries (NBFI) - were "very low", exposing them to the risk of running out cash at times of market stress.
"Given that liquidity buffers in the NBFI sector remain very low, sudden investment fund outflows, large margin calls or lapsing insurance policies could lead to forced asset sales, which would amplify downward pressures in financial markets," the ECB said.
In particular, the ECB found many bond funds did not have enough liquid assets to withstand 30 days of severe outflows, with the proportion highest among high-yield and emerging-markets funds.
Insurance companies and pension funds (ICPF) that use derivatives could be exposed to the risk of "large margin calls", the ECB added, citing those suffered by their UK peers last year as a precedent...
more at Reuters