FRANKFURT (Reuters) -Euro zone banks may come under pressure in a scenario in which U.S. dollar funding dries up, potentially forcing them to curtail lending to the economy, the European Central Bank’s chief economist Philip Lane said on Tuesday.
“The combined presence of substantial USD-denominated off-balance sheet exposures and volatile funding means that sudden changes in these net exposures cannot be ruled out,” Lane said.
“An increased probability of such a risk event would then generate pressures on both sides of banks’ balance sheets and potentially downward pressure on on-balance sheet exposures like loans to the real economy.”
(Reporting By Francesco Canepa; Editing by Alex Richardson)
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