Banks are the main component of the financial sector. Indeed, their role is crucial for financing the European economy, providing more than 70% of the total funding received by households and businesses. The contribution of markets and their infrastructures to this function is significantly smaller; these encompass various organized platforms that enable the buying and selling of all types of financial assets.
Naturally, one cannot speak of watertight compartments between these two components of the financial system, as it is characterized by a complex network of dependencies and interactions among different agents, which strengthens its liquidity and capacity to provide both direct financing and a wide variety of assets for investment. This complexity logically presents risks, which must be understood—and here financial education plays an important role—and controlled—and here supervisors play a key role in preventing them from materializing.
The European Central Bank (ECB) monitors the system to detect vulnerabilities and assess its overall resilience. All of this is aimed at preserving financial stability, meaning the ability to withstand shocks, and protecting the functioning of real economic activity.
For the ECB, the main risks to financial stability today are centered on valuations in some markets and high public debt, in a context of geopolitical tensions and economic uncertainty. However, stability is reinforced by solid, profitable banks with the capacity to finance the needs of the European economy. That is why it is a priority for the European authorities that this does not change, and it should be essential for all countries to preserve this strength.
José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association
