ECB's Angeloni Sees Possible Rise in Banking Contagion Risks

(Bloomberg) -- European Central Bank official Ignazio Angeloni sees a possible inversion of the economic cycle that could slow 2019 growth while banking contagion risks may rise, according to an interview published Saturday.

“In the euro zone, economic growth will continue but it can slow down for various factors, due in part to global developments,” ECB supervisory board member Angeloni said in the interview with Il Sole 24 Ore newspaper.

He noted that as a result of ECB actions, the incidence of riskier financial instruments in the balance sheets of major banks had been reduced in the last few years.

“The new cyclical phase could make the risk factors more important,” Angeloni said. That in turn could “favor the phenomenon of contagion which the conditions of abundant liquidity in recent times had discouraged.”

He continued: “To control systemic risks there is the macroprudential tool, which up until now hasn’t been adequately used.”

The ECB last month took the watershed decision to halt its 2.6 trillion-euro ($3 trillion) bond-buying program, capping massive monetary support even though the euro-zone economy looks vulnerable again. The central bank cut the 2019 growth forecast to 1.7 percent.

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