In introductory remarks to the European Parliament’s ECON Committee, European Central Bank Vice-President Luis de Guindos presented the ECB’s Annual Report for 2024 and its response to Parliament’s resolution, setting out the ECB’s assessment of the economic outlook, inflation and financial stability. He reported that the ECB has reduced the deposit facility rate by 175 basis points to 2.25% since it began cutting rates in June 2024, and reiterated a data-dependent, meeting-by-meeting approach without pre-committing to a rate path. De Guindos characterised the environment as exceptionally uncertain, with trade-related risks intensifying and triggering the most significant financial market turmoil since the pandemic. He said euro area banks’ valuations have been affected but that fundamentals remain robust, supported by sizeable capital and liquidity buffers, while warning that disorderly market adjustments could be amplified by the growing role of non-bank financial institutions and that trade conflicts could increase credit risk and add pressure to government finances. On the regulatory agenda, he called for completing the banking union through an effective crisis management and deposit insurance framework extending to small and medium-sized banks and progress on a European deposit insurance scheme, and argued that non-banks should face robust rules with regulatory gaps closed, alongside simplification that does not amount to deregulation.

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