In a similar way, the existence of robust financial markets and institutions also facilitates the international flow of funds between countries. Deep and liquid capital markets not only help provide finance for government but also increase the benefits of financial integration and improve the resilience of countries against shocks.
On the downside, banks may tighten credit standards by more than currently envisaged because of risks to the value of their assets, their exposure to interest rate risk and tighter funding conditions. [5] A reemergence of financial tensions constitutes another downside risk. Together, such effects could accelerate disinflation in the euro area. On the upside, risks are broader.