Low growth in the euro area could harm banks’ ability to issue bail-in debt, the European Central Bank said on Wednesday. Capital ratios are resilient enough in the face of a downside scenario, but the central bank expects profitability levels to remain low.
The ECB published a financial stability review (FSR) on vulnerabilities in the euro area, stressing the areas of concern should the most averse scenario occur.
The downside scenario is linked to global trade tensions and a disorderly divorce between the UK and the EU.
If this scenario is