*** Let me begin by providing you some further information about the recent events in financial markets and the ECB’s interventions. In July and early August, the crisis in the so-called US sub-prime mortgage market intensified and appetite of global investors for risky assets declined. Market volatility increased in all asset classes. Stock prices declined and government bonds benefited from safe-haven investment flows.
In this context, several investment funds holding asset-backed securities suspended withdrawals. A number of European banks admitted direct or indirect exposures to the US mortgage market. Yet it is important to remark that the credit losses were not significant enough to materially impact the soundness of core financial institutions.