Stability risks to Dutch financial sector rise further: Central bank

Highly indebted households, businesses and governments may face difficulties if interest rates rise further and income growth lags behind, it says.

Financial stability risks have increased over the past six months. High inflation, rising interest rates, the war in Ukraine and the possibility of a global recession have combined to create an unprecedented situation.

Furthermore, inflation may remain high for longer than is currently being anticipated in financial markets and economic forecasts. These developments will put the financial sector to the test in the period ahead, it says.

Dutch financial institutions too are in a healthy position with solid buffers.

“Inflation is high and interest rates are rising, while economic growth is slowing. This is a mix of factors that we have not seen to this extent since the 1970s. We are in better shape than we were then, and I have confidence in the resilience of our financial sector, but this combination of adverse developments undeniably increases financial stability risks,” De Nederlandsche Bank (DNB) president Klaas Knot said in an official release.

ALCHEMPro News Desk (DS)