leading to specific market dislocations.
He said that the German banking system "has taken some pain," but highlighted that there is "no systemic danger" and the financial system has managed to absorb the impacts of higher rates well. Generally speaking, higher interest rates should be a positive for banks' balance sheets. However, problems can arise when banks take on additional risk and fail to keep up with a continued and sharp increase in rates.
Data released last week showed that in the euro zone, banks have started to tighten conditions for credit, while borrowers have also demanded less credit. These dynamics could translate into a further economic slowdown.
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