Most of these risks do not come to pass, and if they do eventuate they don’t necessarily unfold as we had imagined they might. Still, the Bank makes considerable efforts to think about how things could turn out differently to the central forecast.
However, we still observe a number of obstacles that hinder the fungibility of capital and liquidity of banking groups. Very often, these obstacles relate to regulatory fragmentation and ring-fencing of national markets. Further harmonisation would help to address many of the issues, while appropriate prudential safeguards can be put in place to address possible financial stability concerns by national authorities.