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ECB's Noyer urges vigilance on low rates, volatility for banks
[PARIS] The risks related to market volatility and low interest rates merit special attention for the banking sector, ECB governing council member Christian Noyer said on Tuesday.
Speaking as head of France's ACPR financial regulator, Mr Noyer said French banks' interest margins suffered under low interest rates in particular due to regulated rates on savings accounts, which have not been cut in line with market rates. "Diverse risks weighed in 2014 and still today warrant special vigilance for the financial system," Mr Noyer, who is also governor of the Bank of France, said at a news conference. "I'm thinking in particular about the market volatility amid often limited liquidity as well as the context of low interest rates in euros across the yield curb," he added.
He also warned about the impact of low interest rates hitting insurers' investment returns over the medium term, singling out life insurers in particular. "Vigilance is needed on the quality of their investments and the rates they offer life insurance clients," Mr Noyer said.
However, insurers would also suffer if interest rates rose too quickly, which would reduce the market value of their fixed income portfolios and might also provoke a big outflow of client funds, Mr Noyer said.