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ECB decision is a test of the conundrum facing central banks

The renewed sell-off in global bank equities today, centring on Credit Suisse, is evidence that concerns about the resilience of the banking sector are now spreading outside of the US. There are still huge uncertainties about what might happen next, but central banks, including the ECB tomorrow, will now have to factor in the risk that the current situation snowballs into a broader loss of confidence in the banking system and a significant tightening in financial conditions.

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