Falling T2 balances bode well for eurozone’s stability

Impact of fragmentation would be less severe today than in 2010s, says Marcello Minenna

After a decade of below-zero levels, interest rates in the eurozone have been trending back into positive territory. This, together with the gradual downsizing of balance sheets in the Eurosystem – the European Central Bank and national central banks (NCBs) – is reducing the amounts of risk segregated in member states’ financial systems. This means that if a country crashed out of the eurozone, the remaining members would be less severely affected than they would have been had a fragmentation

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