In an interview, European Central Bank Vice-President Luis de Guindos said the Governing Council is assessing a new global supply shock linked to tensions in the Middle East that would first affect inflation and then growth, leaving the June interest rate decision open. He said the ECB will continue to act meeting by meeting and on the basis of incoming data, with new macroeconomic projections and more information on the conflict expected to inform the June discussion. De Guindos said the shock goes beyond energy to other goods, worsens the terms of trade and could weigh on consumption and investment enough to hit growth more than Russia’s invasion of Ukraine, while later tempering the initial inflation effect. On regulation, he backed simplification of the capital framework, reporting and supervision only to remove duplication and redundancies, but said lowering capital requirements would be a mistake because they are not restricting credit and remain a source of strength for European banks. He also said the ECB’s role in bank mergers is limited to assessing solvency, while political resistance to cross-border consolidation undermines the credibility of the banking union and capital markets union agenda. He also reiterated the case for a digital euro as a euro area-wide payment instrument that would reduce dependence on US payment systems while remaining complementary to cash and private sector payment services. In the ECB’s broader risk assessment, he pointed to higher geopolitical risk, elevated market valuations, limited fiscal space, and links between banks and private credit and equity as key vulnerabilities, and said banks and the ECB should invest more in cybersecurity as artificial intelligence can make cyberattacks more effective.
European Central Bank2026-05-31
European Central Bank Vice-President says June rate decision is not predetermined and opposes cutting bank capital requirements
European Central Bank Vice-President Luis de Guindos said the Governing Council is assessing a new global supply shock from Middle East tensions that could initially raise inflation and then weigh on growth, leaving the June interest rate decision data-dependent. He backed simplifying regulation by removing duplication but warned against lowering capital requirements, and said political resistance to cross-border bank mergers undermines the banking and capital markets unions. He reiterated the case for a digital euro to reduce reliance on US payment systems and cited geopolitical risk, stretched valuations, limited fiscal space, banks’ links to private credit and equity, and rising cyber risk as key vulnerabilities.