Financial leverage on this scale is much higher than in other countries with a similar level of development. Moreover, much of the credit growth has taken place outside the formal banking system, a development which needs to be monitored closely to minimise risks to financial stability.
The TLTRO III programme addressed the need for significant stimulus during the pandemic, strengthening the transmission of rates to the economy via banks. But now the environment has changed completely – and we need to ensure that the lower cost of TLTRO funding does not impede monetary transmission when policy needs to be normalised.