Germany’s RED ALERT: Eurozone warned of ‘sharp’ rates rise and banks AREN’T prepared

Thursday, April 13, 2017
By Paul Martin

ONE of Germany’s top bankers is warning the European Central Bank could be forced to introduce “sharp” rates rises sparking hyperinflation fears.

Thu, Apr 13, 2017

And he says banks may be unprepared for the outcome of a spike which could cause wipe-out for the value of the euro.

Bundesbank executive board member Andreas Dombret issued a very targeted and stark warning to banks this morning.

And he said risk managers should beware as most of them have never lived through a period of significant rates rises which can lead to hyperinflation.

Germany’s central bank has been lobbying the European Central Bank (ECB) to end its £1.95trillion (€2.3tn) bond-buying program known as quantitative easing, which has been active since January 2015, over concerns it is holding the country’s economy back.

Policy chiefs at the Bundesbank have directly targeted the bank’s Italian chief Mario Draghi over the programme which is allegedly saving debt-ridden euro states from default.

Now Mr Dombret is warning banks to be on their guard and be prepared for “change” and “sharp rises”.

He told CNBC: “Let’s face it, there are quite a number of risk managers who have never seen interest rates rise and who have never seen the interest rate risk and even thought about (it) and have concentrated on credit risk and have concentrated on liquidity risk, so it’s about time to prepare for a potential change.

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