Furthermore, following several years of robust monetary growth, the liquidity situation in the euro area is ample by all plausible measures. Continued strong monetary and credit growth in an environment of ample liquidity point to upside risks to price stability over the medium to longer term.
The two key principles for prudential regulation of nonbanks when it is warranted, are simple: First, we should be attentive to solvency and liquidity; second, we should recognize that the financial system will change over time, and thus close monitoring and analysis of the system are essential. Insolvency and illiquidity are classic financial stability concerns.