European Banks To Get Stimulus Soon? Draghi Hints At Possibility After Sharp Share Declines

In what were meant to be calming remarks, European Central Bank President Mario Draghi said Monday “we will not hesitate to act” in revisiting monetary policies in the midst of turbulent financial markets. The comments come as European banks see a sharp decline in their share prices.

“In the light of the recent financial turmoil, we will analyze the state of transmission of our monetary impulses by the financial system and in particular by banks,” Draghi said while speaking to members of the European Parliament in Brussels, Bloomberg reported. He said the ECB would also examine the sharp decline in energy prices.

While Draghi argued that European banks are in a stronger position than before the eurozone banking crisis four years ago, banking stocks in Europe have lost nearly a quarter of their value since the beginning of 2016, the BBC reported. Last week saw dramatic fluctuations in stocks including Deutsche Bank AG and Societe Generale SA.

“The sharp fall in bank equity prices reflected the sector’s higher sensitivity to a weaker-than-expected economic outlook; it also reflected fears that some parts of the banking sector were exposed to the higher risks in commodity-producing sectors,” Draghi said. He described a “general deterioration in market sentiment” since December that has investors worried.

The ECB will make its next policy move March 10 as global oil prices continue to hover around $30 a barrel, while the bank’s goal of just under 2 percent inflation has not been met.

Draghi suggested that a stimulus would be possible in the face of economic uncertainty as well as political uncertainty. Britain is debating a potential exit from the EU unless its demands for reforms are met, and a refugee crisis that has divided member states on how to respond.

Despite what were meant to be calming and reassuring remarks, the euro fell against the dollar Monday following Draghi's comments.