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Turbulent times: geopolitical risk and its impact on euro area financial stability

Author

Listed:
  • Dieckelmann, Daniel
  • Kaufmann, Christoph
  • Larkou, Chloe
  • McQuade, Peter
  • Negri, Caterina
  • Pancaro, Cosimo
  • Rößler, Denise

Abstract

Geopolitical risk can be a threat to financial stability and the global economy. It can adversely affect the economy and financial markets and consequently have a negative impact on the funding, lending, solvency, asset quality and profitability of banks and non-banks alike. Recent history suggests that adverse geopolitical events alone are unlikely to cause a systemic crisis, although they may act as a trigger for systemic distress if they interact with pre-existing vulnerabilities. Looking ahead, policy authorities need to monitor geopolitical risk and assess its possible consequences for financial stability. Financial institutions should apply a combination of sound risk management and business diversification to address geopolitical risk. JEL Classification: G1, G21, G23

Suggested Citation

  • Dieckelmann, Daniel & Kaufmann, Christoph & Larkou, Chloe & McQuade, Peter & Negri, Caterina & Pancaro, Cosimo & Rößler, Denise, 2024. "Turbulent times: geopolitical risk and its impact on euro area financial stability," Financial Stability Review, European Central Bank, vol. 1.
    • Handle: RePEc:ecb:fsrart:2024:0001:1
    Note: 2857527
    as

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    File URL: https://www.ecb.europa.eu//press/financial-stability-publications/fsr/special/html/ecb.fsrart202405_01~4e4e30f01f.en.html
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    More about this item

    Keywords

    banks; financial stability; Geopolitical risk; non-bank financial intermediaries; transmission channels;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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