Euro-zone banks will suffer if the ECB has to decide not to raise its interest rates

The growth slo wdown in the euro zone, the equity market decline, the Italian crisis and the persistently low level of core inflation could discourage the ECB from raising its interest rates after the summer of 2019. If this scenario indeed materialises, long-term interest rates will remain low , the euro yield curve will stay very flat, and this will be negative for banks. It could reduce credit supply and account for part of the drastic decline in the share prices of euro-zone banks.