Geopolitical events create tougher financing conditions, ECB finds

Systemic crises are unlikely unless a significant shock occurs


Geopolitical risk events may impair monetary policy transmission and force banks to raise lending rates, European Central Bank (ECB) economists said in a blogpost on May 14.

Large geopolitical risk events, such as the ongoing conflicts in Gaza and Ukraine, can trigger rapid shifts in market and affect financial stability.

The team of ECB researchers said geopolitical shocks are “unlikely” to cause a systemic crisis, but could still do so in the event of a very large shock or amplification due to

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