On Tuesday, the European Central Bank (ECB) warned that leading banks in the Eurozone – BNP Paribas, Deutsche Bank, BPCE, Credit Agricole, ING, Santander, Societe Generale, and UniCredit – could suffer if their financial clients, such as funds, insurance, and clearing houses, begin to withdraw their deposits. This warning was reported by Reuters.
In its research, the ECB highlighted the risk of secondary effects due to “shadow banks,” such as funds and other financial companies that provide financing in one form or another to traditional banks, and vice versa.
The main risks to banking assets, both in terms of loans and deposit obligations, are concentrated in the 13 largest creditors of the Eurozone, including the eight banks mentioned that have global significance.
The biggest risk is that shadow banks may want to withdraw their deposits or agreements to buy back – accounting for 13% of all traditional banks’ obligations.
This risk will materialize if shadow banks, i.e., non-bank financial intermediaries, themselves face outflows or loss of confidence from clients.
Thus, the reliability of banks’ fundamental indicators will be called into question. Another risk is the forced sale of assets by shadow banks, which could lead to losses for traditional banks.