ECB eyes additional steps to tackle bank deposit risks

The European Central Bank is considering whether requirements tailored for individual lenders could help address the risks arising for those holding large amounts of uninsured deposits, a document showed.

A working paper prepared by ECB supervisors for this week’s meeting of euro zone finance ministers said recent banking failures showed “increased attention needs to be paid to the liquidity and funding risk outlook of the sector as monetary policy shifts to a new regime.”

The ECB said it was actively working with other global supervisors to understand which lessons could be learnt from the banking turmoil.

“It may be beneficial to explore how factors such as high deposit base concentration and a predominant reliance on uninsured deposits could be dealt with in the Pillar 2 framework,” it said.

The Pillar 2 framework is a supervisory process aimed at ensuring each lender has adequate capital and liquid asset holdings based on its specific risk profile.

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