The worst case scenario might not have materialised, but “channels of contagion could still re-emerge”. Speaking at the European Systemic Risk Board’s (ESRB) seventh annual conference, ESRB chair and president of the European Central Bank (ECB) Christine Lagarde took stock of the developments since the board published its general warning a little more than a year ago.

In September 2023, the ESRB published its first ever general warning in its 13-year history. The board was concerned that major events in the region – such as Russia’s invasion of Ukraine, Europe’s shortage of oil and gas as that year’s winter approached, as well as the spike in interest rates – would cause severe systemic risks to materialise at the same time, amplifying one another’s impact.  

Vulnerabilities remain

Although this scenario has “so far not come to pass”, there remain risks that deserve continued monitoring, said Christine Lagarde. She warned that “the list of vulnerable nodes in our financial system remains long”, with money market funds and investment funds that invest in illiquid assets being of particular concern. In addition, “the margin policies of central counterparty clearing houses could amplify stress in the system. EU banks’ holdings of fixed income securities could be marked down quite significantly, should they need to be sold”.


The ESRB believes its general warning has raised awareness and catalysed action, helping policy makers “push through necessary reforms to their macroprudential and microprudential policies”. It has also inhibited action, which is positive in some aspects, averting “hasty risk management decisions”. In conclusion, Christine Lagarde encourages policy makers to “remain proactive and alert to financial stability risks as and when they arise”.