Erik Thedéen: New challenges demand a holistic approach to systemic liquidity risk
Anticipation and mitigation of systemic liquidity risks require authorities to learn from: recent episodes of financial turmoil, changes affecting the banking system landscape, new challenges arising from technological advancements and the potential they have to produce large liquidity shifts. This was one of the messages from Governor Erik Thedéen speaking at an ESRB conference today.
Date: 27/09/2024 13:20
Speaker: Governor Erik Thedéen
Place: European Central Bank, Frankfurt, Germany
Erik Thedéen, governor.
Governor Erik Thedéen participated today in a panel discussion on systemic liquidity risks, together with leading academics and practitioners. The panel was part of the Eighth Annual Conference of the European Systemic Risk Board (ESRB) in Frankfurt themed “New Frontiers in Macroprudential Policy”.
Mr. Thedéen reflected on the lessons learned from previous crises and the effect that recent developments may have for system-wide liquidity moving forward, and the banking sector in particular.
“New technologies have had an undeniable effect on our assumptions about the flightiness of deposits. We have also seen how problems at a group of niche banks triggered a global crisis of confidence and how the fear of the possible stigma associated with using some liquidity resources made things worse.”
“Broader changes in the prevailing environment mean that we need to reflect on the wider liquidity dynamics and on the liquidity tools that we have.”
Mr. Thedéen further noted that systemic issues require a holistic view towards macro and micro dynamics, as well as towards the existing interconnections between market participants. “Last but not least, I want to urge all of us who are present here today - practitioners and academics - to invest time and resources in better understanding the interlinkages and dynamics of the financial system as a whole. This applies in particular when it comes to liquidity and its drivers.”