On the other hand, interbank funding markets have generally been stable since the beginning of 2012 due to the abundant liquidity provision by the European Central Bank (ECB). It appears, however, that it will take some more time until uncertainties are dispelled over the fiscal and economic structural reforms as well as over measures regarding the financial system in Europe.
This phenomenon of FX borrowing by unhedged financial clients has its history in many countries across the world. However, it produces specific challenges to the emerging economies without enough hedging instruments available, which still face challenging current account deficits and where FX lending is relatively widespread throughout the economy.