ECB’s McCaul: NBFI risk most prevalent “caution light”

In a published interview with the Financial Times, Elizabeth McCaul, member of the Supervisory Board of the European Central Bank (ECB), discussed the Eurozone banking system, regulatory directions, leveraged lending and banking sector turmoil.

When asked about some of the flashing signals, she said: “We are placing particular focus on the private equity and private credit markets. The growth there is especially noteworthy…and something that always worries us. And it is outside of the banking supervisory and regulatory perimeter.”

In 2012, private equity markets were at €3 trillion globally, while in 2024 that figure is at €8 trillion. The European private credit market has grown 29% in the last three years. At the end of 2023 the euro area private credit market accounted for about €100 billion, or 6% of the global market. Globally, it is now above €1.6 trillion.

“We don’t have a fully clear line of sight from the banking supervisory standpoint about the level of exposures that may be correlated to risk on NBFI balance sheets from banking industry lending arrangements, including repurchase agreements, lines of credit or derivatives to and from NBFIs,” McCaul said.

Read the full interview

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