ECB sees elevated risks to financial stability in Europe

The European Central Bank is warning that some parts of the eurozone economy could face financial disruption from the ongoing pandemic

FRANKFURT, Germany -- The European Central Bank says risks to the stability of companies, banks and financial markets remain “elevated” due to the uneven impact of the pandemic on the economy, warning that the eventual removal of relief measures could lead to a surge in bankruptcies. The ECB warned of “a clustering of risks in some sectors and countries," with companies in the services sector hardest hit by the pandemic having taken on more debt, leaving them vulnerable to prolonged economic weakness. “An increase in corporate insolvencies may impact households via employment prospects, so far prevented by policy support measures," the central bank said in its twice-yearly financial stability review issued Wednesday. The central bank said government relief policies should continue to support the recovery. But bank officials urged governments to move toward more targeted relief and watch for the trouble brewing in particularly hard hit sectors. Services business — restaurants, entertainment, travel, hotels, airlines — that depend on personal contact have been among the most severely damaged during the pandemic closures.